Russian Sanctions: Audit services
On 30 September 2022, Foreign Secretary James Cleverly announced the UK Government’s intention to prohibit the provision of audit services to Russia as a response to the illegal annexation of a number of Ukraine regions.
Main points
- Audit Services to be added to list of Sanctions against Russia.
- The prohibition, other than where a licence is granted by OFSI or in limited other circumstances, requires further legislation to be effective but firms may wish to consider their response sooner.
- Firms should prepare by taking steps to identify audit engagements where there is, or may be, a Russian connection.
While the UK Government has made this announcement, no details have yet been released on the full scope or extent of the prohibition. Legislation will require to be put in place for the prohibition to have legal effect.
Prohibitions on auditing services are already in force through EU sanctions (Regulation (EU) 2022/879) and US sanction (Executive Order 14071).
The UK previously introduced a prohibition on ‘accounting services’ under The Russia (Sanctions) (EU Exit) (Amendment) (No.14) Regulations 2022 (the 14th Amendment Regulations) which came into force on 21 July 2022. The definition of ‘accounting services’ specifically excluded auditing services. Those regulations also prohibited certain ‘business and management consulting services’ which included management auditing.
ICAS are seeking clarification from the Department of Business, Energy and Industrial Strategy (BEIS) on the scope and definition of ‘auditing services’ to be applied as part of UK sanctions.
Steps to be taken
Firms dealing with Russian companies and individuals must be alert to ensure that they comply with all relevant sanction regimes and legislation in the jurisdictions in which they operate.
Accountancy firms have already been reviewing their business relationships and often disengaging with businesses and individuals connected to Russia. Firms should now consider whether a further review of their audit client base is required to ensure they are prepared, as well as they can be, once the scope and definitions are clarified.
Categories:
- Audit and assurance
