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FRC updates guidance for the audit of financial instruments

The FRC yesterday issues updated guidance for audits of entities of all sizes that may be subject to the risks associated with using financial instruments.  The guidance aims to enhance investor confidence in the depth and reliability of the audit.
Nick Land, FRC Board member and chairman of the Audit and Assurance Council, said,

“Financial instruments is an area of financial reporting involving complex issues, which came under particular focus in the financial crisis.
This new update is intended to assist auditors in understanding the nature of, and risks associated with, financial instruments, the different valuation techniques and types of controls that may be used by entities in relation to them, and identifies the important audit considerations.”

The FRC previously issued updated guidance for auditors in 2009 and consulted on the updated guidance in October 2012. The updated guidance is given in Practice Note 23, Special Considerations in Auditing Financial Instruments, and reflects the clarified International Standards on Auditing (ISAs) (UK and Ireland) and guidance issued by the International Auditing and Assurance Standards Board (IAASB) in its International Auditing Practice Note (IAPN) 1000.  The final updated guidance is substantially unchanged from that consulted upon.
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. While the updated guidance is based on IAPN 1000, the FRC has supplemented it where it considers it necessary with further guidance that was set out in the preceding version of Practice Note 23 that is still relevant, but is not covered in the IAPN, and with a small amount of new guidance in relation to matters not covered in either IAPN 1000 or the preceding version of Practice Note 23. This additional guidance is clearly highlighted.
  3. A Feedback Statement on the consultation on the guidance can be obtained here.
  4. 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. Or to Sophie Broom, Communications Executive, on telephone: 020 7492 2395 / 07771 808464 or email: s.broom@frc.org.uk.

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