Newswire January 2024

AUDIT & ACCOUNTING

FRC updates the Ethical Standard for Auditors 

The FRC has published an update to its Ethical Standard for auditors, effective from 15 December 2024. 

The FRC’s update does three main things: 

• First, the FRC has simplified the existing ethical standard and provided additional clarity in a limited number of areas to respond to helpful feedback from auditors. 
• Second, the new standard takes into account recent revisions made to the international IESBA Code of Ethics. This aligns the UK with international standards and helps to ensure high standards of independence and ethical behaviour are applied consistently by UK audit firms and their networks. 
• Third, the FRC has added a new targeted restriction on fees from entities related by a single controlling party. This is in response to issues identified through FRC audit inspection and enforcement cases.  

FRC publishes inspection findings for the Tier 2 and 3 audit firms 

The FRC has published its annual inspection findings for Tier 2 and Tier 3 audit firms, alongside the actions these firms must prioritise to deliver high quality audit and contribute to a more resilient audit market. 

As part of the FRC’s 2022-2023 inspection programme of Tier 2 and Tier 3 firms, which audit Public Interest Entities (PIEs), the FRC inspected 13 audits at 11 of these firms. Only 38% of audits reviewed required no more than limited improvements, 24% required more than limited improvements and a further 38% required significant improvements. The FRC comment that while these results represent only a small risk-based sample, the number of audits requiring significant improvement is unacceptable. The FRC continues to identify deficiencies in the audit of judgements and estimates, and going concern, both of which require audit teams to demonstrate robust professional scepticism.  

IAASB issues guidance for assurance practitioners when citing IFRS Accounting Standards 

The International Auditing and Assurance Standards Board (IAASB) has issued guidance to help firms understand how to reference IFRS Accounting Standards to follow recent updates to the IFRS Foundation® Trade Mark Guidelines. The IAASB’s new guidance clarifies how auditors or practitioners should refer to the IFRS Accounting Standards in their reports. The alert also describes changes that the IAASB intends to make to future editions of the IAASB handbook to address existing references to the IASs and IFRSs. 

IAASB opens public consultation on narrow scope amendments to meet expectations for Public Interest audits 

The IAASB has launched a consultation process on proposed narrow scope amendments to achieve greater convergence with the International Ethics Standards Board for Accountants’ (IESBA) International Code of Ethics for Professional Accountants (Including Independence Standards).  

IFAC announces plan to Revise International Education Standards for Sustainability Reporting and Assurance 

The International Federation of Accountants (IFAC) announced plans to revise the International Education Standards (IES) to bring greater focus to sustainability reporting and assurance competence and recognize the evolving role of professional accountants in this important area. IFAC anticipates launching a public consultation on proposed revisions to the standards in Q2 2024, marking a significant milestone for the global accountancy profession’s journey to advance sustainability disclosure standards that respond to the needs of investors and other stakeholders. 

New and updated resources to help companies apply IFRS S1 and IFRS S2 

The ISSB is providing new and updated resources to help companies apply the Standards ahead of them coming into effect. These will be useful when the standards are adopted in the UK by the FRC. 

UK Endorsement Board sets out year three of its three-year strategy 

The UKEB’s 2024/25 (Draft) Regulatory Strategy sets out year three of its three year strategy. The UKEB is focused on influencing the development of high-quality international accounting standards that endorse the UK public good by ensuring transparency and comparability of financial information thereby sustaining confidence in the UK’s capital markets.  

UK and Switzerland audit authorities jointly approve mutual recognition of audit qualifications 

The UK and Switzerland have made arrangements for mutual recognition of statutory audit qualifications allowing auditors to work more easily in each country, boosting both countries’ audit markets. 

ICAEW 

Professional Standards update 

This ICAEW has launched a new consultation on changes to the professional behaviour provisions in the ICAEW Code of Ethics which will end on 9 February 2024. The purpose of the consultation is to provide an opportunity to consider the proposed changes to the wording of ICAEW provisions under the fundamental principle of professional behaviour in sub-section 115.1 A2 of the ICAEW Code of Ethics. The ICAEW also give a final opportunity to respond to their PII consultation. 

MONEY LAUNDERING 

Amendments to the Money Laundering Regulations 10 

The Money Laundering and Terrorist Financing (Amendment) Regulations 2023 have been made and will take effect from the 10 January 2024. The amendment addresses enhanced customer due diligence (CDD) in respect of politically exposed persons (PEPs) and draws a distinction between domestic (or UK based) PEPs and non-domestic (or international) PEPs. The amendment outlines that a domestic PEP is considered lower risk and, although enhanced CDD is still required, if no enhanced risk factors are present, the extent of enhanced CDD measures is less than the extent to be applied in the case of a non-domestic PEP.