Audit News October 2018
Welcome to Audit News 63, your regulatory update containing the latest technical guidance and best practice advice.
In this issue
Significant changes to the audit rules and regulations are not expected post Brexit, but it should be noted that most firms licensed for audit by ICAEW are licensed in Ireland as well as the UK. This will continue after Brexit under current Irish law.
As of October 2018 we are still waiting for the publication of the government paper on audit and accountancy in the event of a no deal Brexit. From a regulatory perspective it is not thought significant change will occur in the audit rules and regulations as a consequence of Brexit, but there is a lack of detail at this point. After the paper is published it’s hoped further preparatory guidance can be given. Please note most firms licensed for audit by ICAEW are licensed in Ireland as well as the UK - this will continue after Brexit under current Irish law.
Your firm’s registration can be found on the register published by Ireland’s Companies Registration Office
IAASA has advised on five areas of divergence from UK standards. Changes are expected to be minor and may include for example the micro-entity rules in ISA210 which relate only to the UK.
Until January 2017 all accounting, auditing and ethical standards for Ireland and the UK were the same. Standards were approved by the Accounting Standards Board (ASB) with joint UK and Ireland representatives. After FRC reorganisations, IAASA replaced the ASB and it became responsible for the approval of standards in Ireland. In January 2017, IAASA stated they would continue to use the FRC’s standards under licence. However divergence is always possible, and may become more pronounced after Brexit.
IAASA has advised us they are aware of five areas of divergence. Resulting changes are expected to be minor and may include for example the micro-entity rules in ISA210 which relate only to the UK. These will be shared through Audit News when the areas are clarified.
The new Ireland Companies Act introduced new powers to IAASA. IAASA may introduce changes to the Irish Law in the Audit Regulations in 2019.
The Ireland Companies Act received presidential approval on 19 July 2018 and most of it became operative on 21 September 2018. The Act mainly updates the 2014 Companies Act which remains the main point of reference. SI312, which implemented the EU audit changes in 2016, has been repealed and its provisions mainly incorporated as new sections 1464 to 1583 of Companies Act 2014.
The new act gives additional powers to IAASA including a tightening of the relationship between the registered accountancy bodies (RABs) along the lines of the FRC delegation agreement.
IAASA has shared with the RABs (including ICAEW) an outline of their expectation around the relationship. The formal issue of this has not yet been made. The changes may require additional measures to be written into the audit rules and regulations. The wider powers of IAASA include prescription around qualification criteria and CPD and these may need to be reflected. IAASA is open to a reasonable transition period, so we do not expect changes for Irish law in the Audit Regulations to come into effect before 1 April 2019.
Depending on the changes it may become necessary to split the Audit Regulations for the two countries and modify the basis of registration. However the RABs do not see this as necessary at this time.
The preparation of deeds is a reserved activity that can only be carried out by an individual accredited for deeds. Access the new guidance on contractual transactions.
The guidance on accountants and legal services has recently been updated to reflect examples of transactions involving deeds that have been encountered in practice, including dividend waivers. Deeds are required in transactions of a contractual nature where there is an absence of consideration on one side of the transaction. For example, in the case of a dividend waiver, the company benefits from not having to pay out this money while the shareholder does not get anything in return. The formalisation of this waiver is a deed, and the preparation of deeds is a reserved activity that can only be carried out by an individual accredited for deeds.
A new consultation on the Crown Dependencies Audit Rules is now open. Affected firms are encouraged to respond before the 19 December deadline. The new regulations are expected to take effect from 6 April 2019.
Earlier this year, an updated version of the Crown Dependency Audit Rules and Guidance was proposed. In response, a number of firms directly contacted the oversight bodies of Jersey, Guernsey and the Isle of Man. They requested the implementation be delayed until the implications of their scope were fully considered and explained. A particular area of concern is the extension of the definition of PIEs to include all Market Traded Entities. As a result, the new regulations were stood down and the Crown Dependencies Audit Rules (2015) continue to apply. The three oversight bodies issued their consultation on 1 October to which firms are invited to respond by 19 December.
Subject to feedback and any amendment made, the intention is for the new regulations to take effect from
6 April 2019.
The PII Regulations have been amended to reflect the requirements of the Insurance Distribution Directive and to clarify existing regulations. Amendments to the minimum wording have been made to extend coverage and improve drafting.
The PII Committee has provided guidance on some of the key issues that firms should consider when purchasing PII and other forms of insurance.
New helpsheets - going concern in the audit report
Two new helpsheets are now available covering going concern in the audit report:
There are now 17 helpsheets to help your firm prepare audit reports for specific situations and to comply with the relevant laws and revised ISAs (UK), which apply for periods commencing on or after 17 June 2016.
New Practice Assurance webinar
The Practice Assurance webinar has been refreshed to cover the latest developments in Anti-money laundering regulations (AMLR 17), GDPR and Designated Professional Body (Investment Business) as well as covering the four Practice Assurance standards.