FRC: Revised UK Corporate Governance Code, Guidance on Audit Committees, and Auditing and Ethical

27 Apr 2016 11:46 AM

The Financial Reporting Council (FRC) has today issued final draft updates to the UK Corporate Governance Code and the associated Guidance on Audit Committees to reflect forthcoming UK legislation on audit committees and auditor appointments. The FRC has committed to avoid further updates to the Code until at least 2019.

At the same time the FRC has issued final drafts of revised Auditing and Ethical Standards to support the work of audit practitioners in delivering high quality audit, and thereby underpin investor confidence. The revised standards reflect the FRC’s own review of ethical matters, changes to legislation which, after Parliamentary Scrutiny, are intended to take effect on 17 June 2016, and developments in international standards. The FRC has introduced all of the changes in a single revision to standards to ease the process of implementation as well as reduce costs.

The changes strengthen auditor independence by applying prohibitions to a range of engagements that could result in an auditor facing a conflict of interest. Reflecting the FRC’s commitment to proportionate regulation, the revised standards contain some reliefs which will allow, in certain circumstances, an auditor to provide additional assistance to smaller and medium sized entities.

The FRC has issued the final drafts now to enable companies and their auditors to familiarise themselves with the new requirements in good time.

Melanie Mclaren Executive Director Audit, said,

“The updates to the Code, Guidance and Standards implement a significant change in audit regulation in the UK which will be overseen by the FRC as a competent authority with the support of the accountancy professional bodies. The changes will support further innovation by the audit profession in the UK, and ensure that auditors act in a way that is genuinely independent and seen to be in the public interest. The UK has led the way on promoting audit transparency and competition on quality so that investors can have confidence in corporate reporting.”

Notes to editors:

1. The FRC is responsible for promoting high quality corporate governance and reporting to foster investment. We set the UK Corporate Governance and Stewardship Codes as well as UK standards for accounting, auditing and actuarial work.  We represent UK interests in international standard-setting.  We also monitor and take action to promote the quality of corporate reporting and auditing. We operate independent disciplinary arrangements for accountants and actuaries; and oversee the regulatory activities of the accountancy and actuarial professional bodies.
2. On 17 June 2016 changes in EU legislation in respect of statutory audit become effective. BIS, the FRC and other regulators have consulted on the UK implementation of these new requirements which is moving to finalisation. The FRC will confirm the final documents and their effective date once these legislative and regulatory processes are complete. 
3. All Press enquiries should be directed to:

• Peter Timberlake, Head of Communications, on telephone: 020 7492 2397/ 07768 502332, or email: p.timberlake@frc.org.uk.
• Rita Carolan, Communications Manager, on telephone: 020 7492 2307/ 07428 149096 or email: r.carolan@frc.org.uk.
• Alana Sinnen, Communications Manager, on telephone: 020 7492 2395/ 07949 005526 or email: a.sinnen@frc.org.uk.

Related Resources

Feedback Statement and Impact Assessment: Consultation - enhancing confidence in audit

Revised Auditing Standards 2016 

Revised Ethical Standard 2016 

Final Draft: UK Corporate Governance Code 2016 

Final Draft: Guidance on Audit Committees 2016 

Investor Briefing Note: Implementation of the Audit Regulation Directive