FRC: Revision of Practice Note 19: The audit of banks and building societies in the UK

4 Jul 2019 12:50 PM

The Financial reporting Council (FRC) yesterday issued a revision of Practice Note 19: The audit of banks and building societies in the United Kingdom. Practice Notes are intended to assist practitioners to comply with the requirements of UK auditing standards, by providing additional contextual material on the application of those standards in particular circumstances or in specialised sectors.

The revisions to Practice Note 19 reflect:

• revisions to UK auditing standards (ISAs (UK)), in particular ISA (UK) 540 (Revised December 2018), Auditing Accounting Estimates and Related Disclosures, which is effective for audits of financial statements for periods beginning on or after 15 December 2019 (early adoption is permitted);\
• guidance relevant to the audit of estimates for expected credit losses (ECL). Auditors may find this guidance helpful for the audits of periods ending before 15 December 2019 even if they have not early adopted ISA (UK) 540 (Revised December 2018);
• changes in relevant legislation and regulation (at the time of publication, there are EU regulations, including binding technical standards, that apply directly to UK banks and building societies. References to these are made in this revised PN. When the UK ceases to be a member of the EU these references will be updated accordingly); and
• the establishment of the of the Prudential Regulatory Authority (PRA) and Financial Conduct Authority (FCA) in place of the Financial Services Authority (FSA).

The Practice Note has been developed with input from an expert working group including representation from audit firms with bank audit expertise, the banking industry, and the banking regulators. The revisions that the FRC has made will support the delivery of high quality audit, and responds to findings from the FRC’s audit inspection work covering bank audits, which were covered extensively in public reports in June 2018. The final revised Practice Note reflects the actions that the FRC determined should be taken, having considered the responses received.

Feedback Statement and Impact Assessment: The Revision of Practice Note 19