The broader definition and scope of covered persons can lead to difficult decisions for auditors, says Jeremy Williams.
Before the Financial Reporting Council (FRC) introduced its Revised Ethical Standard 2016 (FRC ES), there had been many years for auditors to become familiar with the Auditing Practices Board (APB) Ethical Standards (ES) and for firms to put appropriate procedures in place at the firm and the engagement level.
As the FRC ES introduced various changes relating to independence (see Solving questions on ethics, on page 10), it is important that audit firms ensure their procedures are appropriately updated and individual auditors familiarise themselves with these and the requirements of the FRC ES.
The APB ES outlined the scope of independence requirements by referring, among others, to those in the chain of command. The FRC ES broadens the definition and scope of those affected by independence requirements to covered persons and prohibits them from certain business, financial or employment relationships.
This creates ethical and practical challenges for firms and individual auditors, so this article takes a closer look at what the FRC ES means by covered persons and how this may affect auditors – with the help of some entirely fictional scenarios.
Find out more
Members of the Audit and Assurance Faculty and subscribers to Faculties Online
To read the complete article, subscribe to Faculties Online or join the Audit and Assurance Faculty and get access to this article in full, plus all future publications, events, webinars and services.