There are some good reasons for smaller audit firms and audit entities to welcome the new FRC Ethical Standard for audit engagements, says Lesley Meall.
We waved farewell to the Auditing Practices Board (APB) in 2012, when the Financial Reporting Council (FRC) was restructured and the APB was replaced by the Audit and Assurance Council. The APB Ethical Standards (ESs) related to auditing lived on, until recently, when the FRC consulted on proposed revisions to them as part of a larger exercise that included a comprehensive review of ethical matters and reflected changes to UK and European Union legislation.
“The review was designed to emphasise the importance of auditors considering ethical principles, rather than considering them as a set of rules, and in so doing develop a more outcome-based approach,” says Mark Babington, FRC deputy director, audit policy. This is intended to mitigate the risk that the behaviour of auditors is driven by a series of prohibitions rather than an assessment of what behaviours or actions are appropriate.
The result is a single Revised Ethical Standard 2016. “This is a vast document, but there is not a vast number of substantive differences for most audits,” says Tony Bromell, ICAEW head of integrity and markets. It may take people a while to become familiar with the new layout and to gain clarity on which provisions apply to which audit firms, audits and other public interest engagements, but there is some time in which to do this.
This is an extract from an article in the October 2016 edition of Audit & Beyond, the magazine of the Audit and Assurance Faculty.
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