FRC consults on enhanced Ethical and Auditing Standards

15 Jul 2019 11:42 AM

The Financial Reporting Council (FRC) has today issued a consultation proposing important changes to the UK’s Ethical and Auditing Standards. The FRC proposes to set more stringent ethical rules for auditors, in response to findings from recent audit enforcement cases and from audit inspections. In response to feedback from investors, the FRC also proposes to enhance the quality and content of auditor’s reports in order to improve transparency about what is found in the course of an audit.

Key changes proposed include:

Further detailed amendments to individual standards clarify the auditor’s responsibilities when considering whether the bodies they have audited are compliant with relevant laws and regulations, and when checking there are no material misstatements in the ‘other information’ companies include in their annual financial reports (other than the financial statements which are subject to audit).

The FRC recognises that there are a number of concurrent reviews of the UK audit market, including an Independent Review by Sir Donald Brydon looking at the quality and effectiveness of audit. These proposals are not intended to pre-empt the outcome of those reviews, or the direction of future government policy. They are focussed on improving current Ethical and Auditing Standards in the light of experience since the last major revision in 2016, to drive up the quality of audits being carried out in the UK, and to continue to promote public confidence in audit.

Supporting Documents

The consultation period closes at 5pm on Friday 27 September 2019.

Stephen Haddrill, the FRC’s Chief Executive said: 

“Recent corporate failures and the FRC’s own enforcement work has shown that Standards need to be strengthened. Our audit inspections and enforcement activity continue to identify a lack of professional scepticism and independence as being key points of failure when things go wrong. The UK will only continue to attract high-quality global investment if investors have confidence in the independence of auditors and the means to have a better understanding of the critical judgements those auditors make. Our changes will strengthen and clarify ethical requirements in the public interest.”

Notes to editors

  1. The FRC’s mission is to promote transparency and integrity in business.  The FRC sets the UK Corporate Governance and Stewardship Codes and UK standards for accounting and actuarial work; monitors and takes action to promote the quality of corporate reporting; and operates independent enforcement arrangements for accountants and actuaries. As the competent authority for audit in the UK the FRC sets auditing and ethical standards and monitors and enforces audit quality.
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