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Audit regulations definitions

Definitions and terms for audit regulations

Contents

A

  • Appeal Committee

    The committee of the registering Institute appointed under the Institute's Bye-laws, regulations or Rules with responsibility for hearing appeals against a decision of the Review Committee under these regulations. When a committee discharges these functions its members are to be treated as officers of the Institute for the purpose of regulation 2.04e.

  • appropriate qualification
    1. In relation to the audit of UK entities, a person holds an appropriate qualification if it is:
      • a qualification awarded by a recognised qualifying body under section 1219 of the 2006 Act;
      • an EEA qualification and an aptitude test if required under paragraph 6 of schedule 10 of the 2006 Act;
      • an approved non-EEA qualification and an aptitude test, if required under sections 1219 and 1221 of the 2006 Act.
    2. In relation to the audit of Irish entities, a person holds an appropriate qualification if it is:
      • a qualification awarded by a recognised accountancy body under regulation 26 of S.I. No.220 of 2010;
      • an EEA qualification and if required, the person has passed an aptitude test under regulation 30 of S.I. No.220 of 2010;
      • an approved non-EEA qualification and if required, the person has passed an aptitude test under regulations 30 of S.I. No.220 of 2010 and complies with regulation 112 of S.I. No.220 of 2010

    Note. The Institutes and the ACCA are ‘recognised qualifying bodies’ for the purposes of the UK legislation and ‘recognised accountancy bodies’ for the purposes if Irish legislation.  So the appropriate qualification they award is recognised in both jurisdictions.

    For EEA qualifications the aptitude test is different in the UK and Ireland, so passing the aptitude test in one country does not give audit rights in the other.  For overseas qualifications, the approval process is different in each country, so a qualification approved in one country may not be approved in the other.  Even if approved in both countries, the aptitude test will be different so audit rights will only be obtained in the country of the aptitude test.

    Holding a qualification under b) above will meet the qualification requirement under S187 of the 1990 Act for a public auditor

  • associate

    In relation to an entity, another entity in which it holds an interest on a long-term basis for the purpose of securing a contribution to its own activities by the exercise of control or influence arising from or related to that interest, or which holds such an interest in it. A holding of 20% or more is presumed to create an associate relationship.

  • associated undertaking

    In relation to a body corporate: a parent undertaking or subsidiary undertaking of the body corporate referred to; or a subsidiary undertaking of a parent undertaking of the body corporate

  • audit
      1. any function in respect of a company incorporated in the United Kingdom or Ireland which is required to be performed by a Registered Auditor as auditor of that company;
      2. any function in respect of any of the following entities constituted in the United Kingdom or Ireland which is required to be performed by a Registered Auditor as auditor of that entity:
        • a building society;
        • a credit union;
        • a charity;
        • an industrial and provident society;
        • a friendly society;
        • a pension scheme;
        • a limited liability partnership;
        • a partnership;
        • an open ended investment company;
        • a unit trust;
        • a Lloyds' syndicate;
        • a mutual life office; and
        • a person authorised under legislation relating to the conduct of investment, insurance or mortgage business;
          where such function is expressly required to be discharged either by or under United Kingdom or Ireland legislation.
      1. any function in respect of a United Kingdom traded non-EEA company which is required to be performed by an auditor and which is performed by a Registered Auditor as auditor of that company.
      2. any function in respect of a company incorporated in the United Kingdom or the Ireland which is included on the official list which is performed by a Registered Auditor following appointment as auditor of that company in relation to its financial statements or extracts of financial statements as required by a listing authority or a recognised company stock exchange in either of those jurisdictions.

    Guidance: The reference above to an 'official list' is to the official list as defined in the Financial Services and Markets Act 2000, Part 6 or to the official list of the Irish Stock Exchange in Ireland. It therefore does not include companies whose shares are publicly traded but that are not included in the official list.

    The reference above to a 'listing authority' is to the Financial Services Authority in the UK and the Central Bank in Ireland.

    The reference above to a partnership is to a partnership where all the partners are companies or Scottish partnerships and in the latter case, each partner in the partnership is a limited company.

    The reference to a United Kingdom traded non-EEA company means a body corporate;

    • which is incorporated or formed under the law of a third country (other than Jersey, Guernsey and the Isle of man) that is not an EEA member state;
    • whose transferable securities (equity or debt) are admitted to trading on a regulated market situated or operating on the United Kingdom (eg, the London Stock Exchange); and
    • which has not been excluded (either as an individual company or class of companies or by country) by an order made under the 2006 Act, or by a direction or decision of the oversight body

    Companies incorporated in Jersey, Guernsey and the Isle of Man have already been excluded, so this definition does not apply to them. The latest list of excluded companies can be viewed at www.frc-pob.org.uk.

    Should a registered auditor consider that there is a conflict between the requirements of these regulations (as applied to a particular UK traded non-EEA company) and the non-EEA country law, then the firm should consider seeking a dispensation under audit regulation 2.17 from the Registration Committee.

    Part a(iii) of the definition applies in respect of audits of accounting periods starting on or after 1 October 2010.

    The definition does not extend to reports relating to entities other than those specified.

    The definition only embraces those circumstances where a report is required to be provided by a registered auditor in respect of any of the entities specified and the requirement is express and emanates from legislation (whether primary or secondary) or the rules of a recognised stock exchange (in connection with a company admitted to the official list). The definition does not encompass situations where a report is required by a registered auditor but where the firm does not have to be appointed as auditor to the entity (for example, a report about non-cash consideration under section 593 of the Companies Act 2006).

    The report must be required by legislation that is applicable solely to one of the entities listed above. Reports commissioned, for example by a grant making organisation, where the grant could have been made to any person, to ensure that beneficiaries of funds have used them appropriately would not fall within the definition (even where the requirement for the body to commission such a report itself emanates from statute).

    Persons authorised under legislation relating to the conduct of investment, insurance or mortgage business are those who can undertake investment advice etc. In the UK these would be entities with permission under Part IV of the Financial Services and Markets Act 2000 (or regulations made under that Act) or equivalent legislation in Ireland.

    This definition of 'audit' does not include an independent examination for charities. Nor does it include any report required as part of a public offer of securities (prospectus) required by investment business legislation or any report on a circular to shareholders, required by a stock exchange, to authorise a transaction.

  • audit (archived definition - effective until 31st Dec)
      1. any function in respect of a company incorporated in the United Kingdom or the Republic of Ireland which is required to be performed by a Registered Auditor as auditor of that company;
      2. any function in respect of any of the following entities constituted in the United Kingdom or the Republic of Ireland which is required to be performed by a Registered Auditor as auditor of that entity:
        • a building society;
        • a credit union;
        • a charity;
        • an industrial and provident society;
        • a friendly society;
        • a pension scheme;
        • a limited liability partnership;
        • a partnership;
        • an open ended investment company;
        • a unit trust;
        • a Lloyds' syndicate;
        • a mutual life office; and
        • a person authorised under legislation relating to the conduct of investment, insurance or mortgage business;

        3. where such function is expressly required to be discharged either by or under United Kingdom or Republic of Ireland legislation.

      3. any function in respect of a company incorporated in the United Kingdom or the Republic of Ireland which is included on the official list which is performed by a Registered Auditor following appointment as auditor of that company in relation to its financial statements or extracts of financial statements as required by a listing authority or a recognised company stock exchange in either of those jurisdictions.

    Guidance: The reference above to an 'official list' is to the official list as defined in the Financial Services and Markets Act 2000, Part 6 or to the official list of the Irish Stock Exchange in the Republic of Ireland. It therefore does not include companies whose shares are publicly traded but that are not included in the official list.

    The reference above to a 'listing authority' is to the Financial Services Authority in the UK and the Irish Financial Services Regulatory Authority in the Republic of Ireland.

    The reference above to a partnership is to a partnership where all the partners are companies or Scottish partnerships and in the latter case, each partner in the partnership is a limited company.

    The definition does not extend to reports relating to entities other than those specified.

    The definition only embraces those circumstances where a report is required to be provided by a registered auditor in respect of any of the entities specified and the requirement is express and emanates from legislation (whether primary or secondary) or the rules of a recognised stock exchange (in connection with a company admitted to the official list). The definition does not encompass situations where a report is required by a registered auditor but where the firm does not have to be appointed as auditor to the entity (for example, a report about non-cash consideration under section 593 of the Companies Act 2006).

    The report must be required by legislation that is applicable solely to one of the entities listed above. Reports commissioned, for example by a grant making organisation, where the grant could have been made to any person, to ensure that beneficiaries of funds have used them appropriately would not fall within the definition (even where the requirement for the body to commission such a report itself emanates from statute).

    Persons authorised under legislation relating to the conduct of investment, insurance or mortgage business are those who can undertake investment advice etc. In the UK these would be entities with permission under Part IV of the Financial Services and Markets Act 2000 (or regulations made under that Act) or equivalent legislation in the RoI

    This definition of 'audit' does not include an independent examination for charities. Nor does it include any report required as part of a public offer of securities (prospectus) required by investment business legislation or any report on a circular to shareholders, required by a stock exchange, to authorise a transaction.

  • audit affiliate
    • a person granted affiliate status by ICAEW under clause 12A of the Supplemental Royal Charter of 21 December 1948 for the purposes of these regulations;
    • a person granted status as an affiliate by the ICAI under Bye-law 41 for the purposes of these regulations; or
    • an individual granted Affiliate status by ICAS under Rule 2.2.1 or a firm under Rule 2.2.2 of the ICAS Rules for the purposes of these regulations.
  • audit client

    Any person whose accounts are being audited under these regulations by a Registered Auditor.

  • audit compliance principal

    A responsible individual who is either a principal of the Registered Auditor (or a sole practitioner where the Registered Auditor is a sole practice) or a member of its management board who is responsible for monitoring that the Registered Auditor has complied, and is likely to continue to comply, with these regulations, and whose identity is notified in writing to the Institute and who is the first point of contact with the Institute in connection with these regulations.

    Guidance: The role of the audit compliance principal is to be responsible for ensuring that the firm complies with the audit regulations. A major part of the responsibilities is to make sure the monitoring required by these regulations is carried out. The audit compliance principal need not carry out the reviews personally but should make sure that they are carried out satisfactorily and any appropriate action taken.

  • audit report

    A report by a Registered Auditor which relates to an audit.

  • audit work

    Any work done by or on behalf of the Registered Auditor in respect of an audit.

  • audit working papers

    Material (whether in the form of data stored on paper, film, electronic media or other media or otherwise) prepared by or for, or obtained by the Registered Auditor in connection with the performance of the audit concerned and includes –

    1. the record of audit procedures performed;
    2. relevant audit evidence obtained; and
    3. conclusions reached.
  • auditing standards

    The basic principles and essential procedures (shown in bold type) in the International Standards on Auditing (UK and Ireland) which are to be construed and applied having regard to the explanatory text and other material in those standards; issued by the Auditing Practices Board.

  • auditor sanctions procedure

    The rules and practices of the Financial Reporting Council (the Auditors Regulatory Sanction Procedure) which provide for a sanction determined by it arising from independent monitoring of Major Audits under UK law to be treated as if it were a sanction which the Institute, acting as a Recognised Supervisory Body, had itself determined.

B

  • body corporate

    An entity that has a legal personality (including a limited liability partnership) and a similar body constituted under the laws of a country or territory outside the United Kingdom or Ireland.

  • business day

    A day excluding weekends and public holidays.

  • bye-laws

    The bye-laws of the ICAEW, the ICAS or the ICAI.

C

  • Charter Amendment Acts of 1966

    The Institute of Chartered Accountants in Ireland (Charter Amendment) Act 1966 and The Institute of Chartered Accountants in Ireland (Charter Amendment) Act (Northern Ireland) 1966.

  • Controller

    A person who, alone or with any associate or associates, is entitled to exercise or control 15% or more of the rights to vote on all or substantially all matters at general meetings of a body corporate, or of another body corporate of which it is a subsidiary undertaking.

  • corporate practice

    A body corporate, excluding a limited liability partnership.

  • Council
    • the Council of the ICAEW under Clause 2 of the Supplemental Royal Charter of 21 December 1948;
    • the Council of the ICAS under Rule 45; or
    • the Council of the ICAI under section 3 of the Charter Amendment Acts of 1966.

D

  • director

    Any person occupying the position of director (called by whatever name) in a corporate practice. Also any person under whose directions or instructions the directors of the corporate practice are used to acting.

  • Disciplinary Committee

    The committee of the registering Institute appointed under the Institute's Bye-laws, regulations or Rules with responsibility for disciplining members, firms and others in accordance with the Bye-laws, regulations or Rules. When a committee discharges these functions its member are to be treated as officers of the Institute for the purpose of regulation 2.04e.

  • Disciplinary Scheme

    Any investigation and discipline scheme in which the registering Institute participates for the purposes of the independent investigation of matters concerning members and firms.

E

  • EEA audit firm

    A firm eligible for appointment as an auditor under the law of an EEA member state.

  • EEA auditor

    An individual who holds a qualification to audit accounts under the law of an EEA member state other than the UK and Ireland.

    Guidance: While an EEA auditor can be counted towards those who control a registered auditor, unless any required aptitude test is taken, an EEA auditor cannot be a responsible individual and so in charge of audit work, see chapter 4.

  • EEA member state

    Any country that is a signatory to the European Union and European Community Treaties (ie EU member states) and Iceland, Liechtenstein, Norway. Gibraltar is also treated as an EEA member state by the 2006 Act.

  • employee

    Anyone who carries out audit work for a Registered Auditor, including a sub-contractor or a consultant.

    Guidance: A sub-contractor or consultant cannot become a responsible individual.

  • ethical standards

    The basic principles and essential procedures (shown in bold type) in the Ethical Standards issued by the Auditing Practices Board which are to be construed and applied having regard to the explanatory text and other material in those standards.

F

  • Financial Reporting Council (FRC)

    The Financial Reporting Council Limited, a company limited by guarantee incorporated in England and Wales, number 2486368 and any other body which takes over its functions under the auditor sanctions procedure.

  • firm
    • an individual who engages in the profession of accountancy as a sole practitioner;
    • a partnership which engages in the profession of accountancy;
    • a limited liability partnership which engages in the profession of accountancy; or
    • a corporate practice which engages in the profession of accountancy.

G

  • Group

    A corporate practice, any parent or subsidiary undertakings and any parent or subsidiary undertakings of any of them.

I

  • Institute
    • the Institute of Chartered Accountants in England and Wales (ICAEW);
    • the Institute of Chartered Accountants of Scotland (ICAS); or
    • the Institute of Chartered Accountants in Ireland (ICAI) operating as Chartered Accountants Ireland.
  • Investigation Committee

    The committee of the registering Institute appointed under the Institute's Bye-laws, regulations or Rules with responsibility for considering complaints against members, firms and others as specified in the Bye-laws, regulations or Rules. When a committee discharges these functions its members are to be treated as officers of the Institute for the purpose of regulation 2.04e.

M

  • Major Audit

    An audit conducted under UK law in respect of:

    • a public interest entity
    • any other person in whose financial condition there is a major public interest.
  • management board

    Any committee, board or other management body that is responsible for setting and directing the implementation of the firm's policies.

  • monitoring unit

    The registering Institute or any body undertaking monitoring in accordance with paragraph 12 or paragraph 23 of schedule 10 of the 2006 Act or regulation 83 S.I. No.220 of 2010.

O

P

  • Panel

    A sub-committee of the Registration Committee of the ICAS.

  • PII regulations
    • the Professional Indemnity Insurance Regulations of the ICAEW;
    • the Professional Indemnity Insurance Regulations of the ICAI; or
    • the Professional Indemnity Insurance Bye-laws of the ICAS.
  • practice notes

    Practice notes and bulletins issued by, or with the authority of, the Auditing Practices Board.

    Guidance: These give guidance on how auditing standards can be applied and on new or emerging issues.

  • practising certificate

    A certificate issued to a member by an Institute authorising the member to engage in public practice.

  • principal

    An individual in sole practice, (where the firm is a sole practice), a person who is a partner (including both salaried and equity partners) (where the firm is a partnership), a member of a limited liability partnership (where the firm is a limited liability partnership) a director (where the firm is a company), or any individual who is held out as being a company director, partner or member.

    Guidance: Corporate practices or limited liability partnerships may be principals, where these regulations allow.

Q

  • quality control standards

    The basic principles and essential procedures (shown in bold type) in the International Standards on Quality Control (UK and Ireland) which are to be construed and applied having regard to the explanatory text and other material in those standards, as issued by the Auditing Practices Board.

R

  • Recognised Supervisory Body

    A body recognised under the 2006 Act, or the 1990 Act or the Companies (Audit and Accounting) Act 2003 for the purposes of the registration and supervision of Registered Auditors.

  • Register

    The register of auditors compiled under section 1239 of the 2006 Act or regulation 63 of S.I. No.220 of 2010 or section 198 of the 1990 Act.

  • Registered Auditor

    A firm entered on the register as eligible for appointment as a statutory auditor under section 1239 of the 2006 Act or under regulation 63 of S.I. No.220 of 2010 or section 198 of the RI 1990 Act.

    The register maintained under S198 is the Register of Public Auditors.

  • registering Institute

    The Institute to which the firm is applying for or from which it has obtained registration. In the case of ICAI these functions are carried out by the Chartered Accountants Regulatory Board (CARB) established in accordance with the provisions of Bye-Law 41.

  • Registration Committee

    The committee of the registering Institute appointed under the Institute's Bye-laws, regulations or Rules with responsibility for discharging the functions set out in Chapter 6 or any sub-committee of that committee. When a committee discharges these functions its members are to be treated as officers of the Institute for the purpose of regulation 2.04e.

  • regulations

    These regulations as modified or amended.

  • regulatory penalty

    An amount imposed with the consent of a Registered Auditor as a penalty for breaches of these regulations which the Registered Auditor agrees have been committed.

  • responsible individual

    A principal or employee responsible for audit work and designated as such under regulation 4.01.

    Guidance: The 2006 Act uses the term "senior statutory auditor" for the individual identified by a registered auditor in relation to a specific audit of a UK company who signs the audit report in his own name on behalf of the registered auditor. This individual must be a responsible individual.

  • Review Committee

    Any committee appointed under a registered Institute's Bye-laws, regulations or Rules with responsibility for reviewing decisions made by the Registration Committee as specified in these regulations. When a committee discharges these functions its members are to be treated as officers of the Institute for the purpose of regulation 2.04e.

  • Rules

    The rules of the ICAS.

S

  • S.I. No.220 of 2010

    European Communities (Statutory Audits) (Directive 2006/43/EC) Regulations 2010 of Ireland.  You can view S.I. No.220 of 2010 online as a PDF.

  • sanction

    Any regulatory action including the imposition of condition or restrictions, suspension or withdrawal of registration, and imposition of a regulatory penalty.

T

  • the 2006 Act

    The Companies Act 2006 of the UK.

  • the Act

    The Companies Act 2006 of the United Kingdom or the Companies Acts 1963 to 2009 of Ireland and every other enactment which is made under, or is to be read together with or as one with, any of those Acts.

  • the RI 1990 Act

    The Companies Act 1990 of Ireland.

V

  • voting rights

    The rights to vote on all or substantially all matters at meetings of principals or shareholders of the body in question. In deciding what voting rights are to be taken into account, paragraphs 5 to 11 of schedule 7 to the 2006 Act apply to corporate practices and limited liability partnerships, and paragraphs 5 to 7 and 11 of that schedule apply to partnerships.

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