Q: With the changes to confidentiality under the new ICAEW Code of Ethics, how does this affect us sharing information around the firm, for example for independence and conflict checks?

The new Code of Ethics effective from 1 July 2025 amends wording around disclosure of confidential information. The result is that firms need to think about sharing confidential information within the firm in a similar way to sharing information outside the firm. This means information should not be shared, even internally, unless the firm is permitted or authorised to do so.

Further to this, where information is acquired in the course of professional or business relationships, that information remains confidential even when it becomes publicly available and is within the public domain.

The fact that a client is a client of the firm is, in and of itself, confidential information because that is information acquired only as a result of the professional or business relationship. This means that the sharing of new business relationships or new audit clients around the firm, without prior consent from the client to disclose that information, may be a breach of confidentiality.

As an exception to this requirement not to share confidential information either within or outside the firm, R114.3 confirms that such confidential information may be shared where there is a legal or professional duty to disclose or consent is provided by the client.

A legal or professional duty to disclose exists either to comply with a quality review of a professional body; to respond to an enquiry or investigation by a professional body; to protect the firm in legal proceedings; or to comply with technical and professional standards, including ethics requirements. As such, the sharing of information regarding the acquisition of a new audit client for the purpose of carrying out independence or conflict of interest checks among staff would not be considered a breach of confidentiality as this is an ethical requirement under the FRC Ethical Standard.

Firms will, however, need to carefully consider any existing practices to share new client relationships – as updates to business deliverables – to their wider staff, unless the firm has explicit consent to do so from those clients.

Guidance on the latest iteration of the Code of Ethics, including webinars, podcasts and articles is available: ICAEW Code of Ethics

Q: Can one of the partners in the firm be a trustee for a trust holding shares in the audited entity until the beneficiaries are adults?

The FRC Ethical Standard para 2.16 prohibits a trustee role being held by a firm, covered person or person closely associated with them when, among other circumstances, the trust is able to exert significant influence over the audited entity or the relevant person has significant influence over the investment decisions made by the trust, in so far as they relate to the financial interest in the audited entity.

There will therefore need to be careful consideration of many factors, including whether the partner referred to would meet the definition of a covered person as well as the influence the trust has over the audited entity or the influence that partner trustee may have over the investment decisions of the trust.

Acting as a trustee on behalf of minors could suggest that this trustee role would have some influence over the investment decisions because that trustee would be looking to make decisions in the best interests of those minors to maximise their future return as beneficiaries.

In cases where the prohibition does not directly apply to such a trustee role, firms will still need to consider the overarching principle as to whether an objective, reasonable and informed third party would consider the firm to be independent where one of the partners held such a trustee role. This is an area of professional judgement and the FRC has produced guidance that may be helpful in making and documenting these assessments.

Q: I was appointed auditor after the client’s year end and so haven’t attended their stock count. Can I rely on the previous auditor’s stock count?

As you have been appointed auditor you are responsible for planning and undertaking the audit work. This includes risk assessments and deciding on the most appropriate audit procedures. If another firm, either a previous auditor or a separate accountancy practice, has undertaken stock counts, you could consider whether you can rely on this work as part of your audit evidence under ISA (UK) 500.

ISA (UK) 500 para 6 states that the auditor shall design and perform audit procedures that are appropriate in the circumstances for the purpose of obtaining sufficient appropriate audit evidence. Para 7 then goes on to tell us that the auditor shall consider the relevance and reliability of the information to be used as audit evidence, including information obtained from an external information source.

The reliability of information is influenced by its source and its nature and the circumstances under which it is obtained (para A35). Information obtained from a source independent of the entity may not be reliable if the source is not knowledgeable, or the source firm lacked objectivity.

As a result, it would still be necessary to undertake your risk assessment on inventory. This may result in additional audit work being required, above and beyond the counts performed by the other firm, in order to address your specific risks and ensure you have obtained sufficient appropriate audit evidence to form an opinion on the financial statements.

Consideration would also need to be given to the firm that undertook the work, including the firm’s objectivity, the members of staff who performed the counts, their experience and the directions they followed, in order to understand and make a decision on whether that information is reliable and relevant to your audit. 

Another TAS Q&A for Audit & Beyond also considers some of the problems that new appointments can create for auditors.