Government announces major changes to audit regulation
The audit tendering process for public interest entities and the regulatory responsibility of the Financial Reporting Council (FRC) are set to change, under new UK Government legislation announced today.
The proposed legislation will implement parts of the EU Audit legislation (Directive and Regulation) agreed in 2014.
Public interest entities – including listed companies, banks, building societies and relevant insurers – will be required to put their audit out to tender every 10 years and change their auditor at least every 20 years
The legislation, which will take effect in June 2016 (subject to certain transitional provisions), will also change the remit of the FRC for regulating certain audit firms.
The Government said that it intends that the FRC "should be the UK competent authority for the regulation of auditors, but that legislation will require it to delegate regulatory tasks so far as is possible to recognised supervisory bodies that meet criteria set out in the legislation."
The statement went on to say: "Overall this would mean the FRC would only have to conduct audit inspections, investigations and disciplinary cases in relation to public interest entities, and would oversee the work of the recognised supervisory bodies for other audits.
"It would still be open to a recognised supervisory body to ask the FRC to agree to undertake work that would otherwise have been delegated to the recognised supervisory bodies. As now the FRC would also have the ability to take over any particular inspection or investigation if it deemed it to be in the public interest."
The Government statement also said that the "FRC and the recognised supervisory bodies will be obliged to cooperate with each other", to minimise the compliance cost for business.
The Government is due to publish a more detailed consultation on the legislation in the next few months. The full statement is now available to view.
Source: UK Parliament