John Selwood Q&As September 2015
New appointments and new UK GAAP pose challenges for auditors. John Selwood shows us how to navigate the pitfalls.
Q) When FRS 102 is applied are there any consequent changes required to the audit report?
A) Yes, but they are not particularly significant. The main issue to note is that reference to the accounting framework will change.
In particular, for periods commencing on or after 1 January 2015 (or for early adoption of the 2015 Financial Reporting Standard for Smaller Entities; FRSSE), references should be to FRSSE 2015, not FRSSE 2008. The Financial Reporting Council (FRC) has withdrawn FRSSE 2015, from periods beginning on or after 1 January 2016.
More significantly, change also comes from the Companies, Partnerships and Group (Accounts and Reports) Regulations 2015, SI2015/980, which were introduced in March.
The auditor must now state: A) whether, in his opinion, based on the work undertaken in the course of the audit:
- the information given in the strategic report (if any) and the directors’ report for the financial year for which the accounts are prepared is consistent with those accounts; and
- any such strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
B) state whether, in the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, he has identified material misstatements in the strategic report (if any) and the directors' report; and
C) if applicable, give an indication of the nature of each of the misstatements referred to in (B).
This represents a significant extension to the auditor’s responsibilities in that the auditor now reports additionally on whether the narrative reporting content complies with the relevant legislation. This applies for periods commencing 1 January 2016, unless the directors apply the new regulations early. In practice, auditors will have to be vigilant to make sure that they use the right audit report in the right period.
Finally, do not forget the option to file abbreviated accounts is withdrawn for both small and medium-sized companies. Therefore, the special auditors’ report on abbreviated accounts is no longer relevant.
This is an extract from an article in the September edition of Audit & Beyond, the magazine of the Audit and Assurance Faculty.
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