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Small practice, big responsibility

Appointing or being an emergency alternate can be challenging, particularly for sole practitioners. Lesley Meall explores some of the difficulties.

Ask auditors to talk to you about emergency alternates – off the record – and they are happy to share. “I need to put my thinking hat on and do something about that. My emergency alternate is giving up their audit registration,” says one sole practitioner. Other responses include: “I have an informal reciprocal arrangement with another small practice”, “I don’t need one, three of us are registered”, and “I use a four-partner practice as my alternate. They have the manpower to do most of my work”. While another quips: “It’s Friday afternoon. Do I really have to contemplate my own mortality?”

Yes, you do; even if you happen to be reading this on a Friday afternoon. You also need to consider the possibility of accidents, illnesses and various other things that could potentially lead to your short- and long-term absence. Because being a ‘Responsible Individual’ (RI) is about more than its definition in the ICAEW Audit regulations and guidance (tinyurl.com/ABregs13).

Every ICAEW firm has a duty to ensure continuity of client service and the death or incapacity of a registered auditor also has legal implications.

Particular care should be taken planning for and responding to events during an audit engagement, such as the mental or physical incapacity or death of a ‘senior statutory auditor’ (the term from the Companies Act 2006, which equates with the term ‘engagement partner’ used in International Standards on Auditing). These events can create challenges even in firms with multiple RIs. In a small audit firm or a firm with a sole principal, where just one individual is a registered statutory auditor (and a lone RI), planning for and responding to an event that results in their short- or long-term unavailability can be particularly challenging.

This is an extract from an article in the July/August 2015 edition of Audit & Beyond, the magazine of the Audit and Assurance Faculty.

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