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Spoiled for choice

Auditors must not make decisions for clients, but they may still need to discuss some FRS 102 options.

There are very few financial reporting standards in the UK that have no choices in them. The only one that springs to mind is FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime, which is a set of accounting policies with no options. This is one of the reasons that the accounting policies do not need disclosure within a set of FRS 105 accounts. FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland has many areas that need a decision from the client.

These can be summarised as: optional exemptions and accounting treatment at transition; accounting policy options; and disclosure and filing options. It is important for auditors to remember that they should not take these decisions on behalf of their clients, as doing so would be to act as management of the entity. This is not only dangerous from a professional indemnity insurance viewpoint, but also prohibited in most cases by the auditing ethical standards (internationally and in the UK).

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