ICAS ICAS logo

Quicklinks

  1. About Us

    Find out about who we are and what we do here at ICAS.

  2. Find a CA

    Search our directory of individual CAs and Member organisations by name, location and professional criteria.

  3. CA Magazine

    View the latest issues of the dedicated magazine for ICAS Chartered Accountants.

  4. Contact Us

    Get in touch with ICAS by phone, email or post, with dedicated contacts for Members, Students and firms.

Login
  • Annual renewal
  • About us
  • Contact us
  • Find a CA
  1. About us
    1. Governance
  2. Members
    1. Become a member
    2. Newly qualified
    3. Manage my membership
    4. Benefits of membership
    5. Careers support
    6. Mentoring
    7. CA Wellbeing
    8. More for Members
    9. Area networks
    10. International communities
    11. Get involved
    12. Top Young CAs
    13. Career breaks
    14. ICAS podcast
    15. Newly admitted members 2022
    16. Newly admitted members 2023
  3. CA Students
    1. Student information
    2. Student resources
    3. Learning requirements
    4. Learning updates
    5. Learning blog
    6. Totum Pro | Student discount card
    7. CA Student wellbeing
  4. Become a CA
    1. How to become a CA
    2. Routes to becoming a CA
    3. CA Stories
    4. Find a training agreement
    5. Why become a CA
    6. Qualification information
    7. University exemptions
  5. Employers
    1. Become an Authorised Training Office
    2. Resources for Authorised Training Offices
    3. Professional entry
    4. Apprenticeships
  6. Find a CA
  7. ICAS events
    1. CA Summit
  8. CA magazine
  9. Insight
    1. Finance + Trust
    2. Finance + Technology
    3. Finance + EDI
    4. Finance + Mental Fitness
    5. Finance + Leadership
    6. Finance + Sustainability
  10. Professional resources
    1. Anti-money laundering
    2. Audit and assurance
    3. Brexit
    4. Business and governance
    5. Charities
    6. Coronavirus
    7. Corporate and financial reporting
    8. Cyber security
    9. Ethics
    10. Insolvency
    11. ICAS Research
    12. Pensions
    13. Practice
    14. Public sector
    15. Sustainability
    16. Tax
  11. CPD - professional development
    1. CPD courses and qualifications
    2. CPD news and updates
    3. CPD support and advice
  12. Regulation
    1. Complaints and sanctions
    2. Regulatory authorisations
    3. Guidance and help sheets
    4. Regulatory monitoring
  13. CA jobs
    1. CA jobs partner: Rutherford Cross
    2. Resources for your job search
    3. Advertise with CA jobs
    4. Hays | A Trusted ICAS CA Jobs Partner
    5. Azets | What's your ambition?
  14. Work at ICAS
    1. Business centres
    2. Meet our team
    3. Benefits
    4. Vacancies
    5. Imagine your career at ICAS
  15. Contact us
    1. Technical and regulation queries
    2. ICAS logo request

The Future of Assurance revisited

Photo of a time-lapsed London bridge
  • LinkedIn (opens new window)
  • Twitter (opens new window)
By James Barbour, Director, Policy Leadership and Anne Adrain, Head of Sustainability & Assurance

18 October 2018

Key points

  • In 2010, an ICAS working group published a paper: The Future of Assurance, offering their vision for the future of assurance.
  • With auditors once again under the spotlight we revisit the paper to assess to what extent they have influenced the current corporate reporting and assurance environment.
  • We also look ahead and consider whether anything further can be drawn from the publication’s recommendations.

The Competition and Markets Authority (CMA) has recently announced a study into the UK audit market prompting ICAS to revisit the 2010 Future of Assurance paper and the impact of its recommendations.

Background

In 2010, ICAS established a working group in the aftermath of the global financial crisis in recognition that the crisis had damaged faith in both corporate reporting and assurance. Now, with auditors once again under the spotlight, we revisit the working group’s recommendations and highlight what could still be implemented.

At that time, the accountancy profession was forced to ask itself some difficult questions about its role in the preservation and promotion of trust.

The working group’s vision was for ‘the highest quality of reporting facilitating efficient capital markets and an assurance framework to inspire confidence in that reporting'.

To this end, the working group published a paper: The Future of Assurance, offering their vision for the future of assurance. The paper emphasised that assurance is more than external audit – it is a process which begins internally within the company itself and therefore does not focus solely on the traditional external audit of the financial statements.

It considered the internal processes in the company, corporate reporting and the role of the audit committee - while recognising the critical role of the independent external audit. The findings were targeted towards UK listed companies but they were recognised as relevant across the globe.

Now, eight years on, the accounting profession, or more specifically, auditors, are once again under the spotlight in the UK and the debate on the purpose and role of audit has been re-opened.

It would, therefore, seem appropriate to revisit the recommendations from the 2010 Future of Assurance paper to assess to what extent they have influenced the current corporate reporting and assurance environment and whether anything further can be drawn from the publication’s recommendations.


Summary of influence

The Future of Assurance paper clearly influenced the regulatory environment and standard setters following its publication and we highlight below those areas where the greatest influence was achieved.

1. Fair balanced and understandable

Recommendation

The Future of Assurance report recommended that there should be a sign off by the board that the annual report represents a balanced and reasonable review of the company.

Response

The 2012 version of the UK Corporate Governance Code introduced the provision that the directors had to state that they considered the annual report and accounts, taken as a whole, to be fair balanced and understandable. Although the FRC adopted slightly different terminology, the substance of its response was very similar to that proposed in the Future of Assurance report.

2. Going concern

Recommendation

The 2010 paper recommended that boards should include their rationale for concluding that the business is a going concern and an articulation of whether the period considered is limited to 12 months from the date of signing the financial statements or whether it is longer.

This rationale should include: disclosure of the key assumptions on which the Board has based its assessment.

Response

In the 2012 version of the UK Corporate Governance Code, the FRC introduced a provision that Boards should state the period over which they had assessed the viability of the entity:

"Taking account of the company’s current position and principal risks, the directors should explain in the annual report how they have assessed the prospects of the company, over what period they have done so and why they consider that period to be appropriate.

"The directors should state whether they have a reasonable expectation that the company will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, drawing attention to any qualifications or assumptions as necessary.”

3. External assurance

Recommendation

The Future of Assurance publication proposed that a report should be provided by the external auditor that the annual report, excluding the financial statements is balanced and reasonable and consistent with the financial statements.

Response

ISA 720 (UK), The Auditor’s Responsibilities Relating to Other Information, which was revised in 2016, now requires the auditor to address whether the statement by the directors that the annual report is fair balanced and understandable is consistent with the financial statements and the knowledge obtained by the auditors during the audit.

Recommendation

The report also acknowledged that there is a desire from users to understand more about the external audit process.

Response

ISA (UK) 701, Communicating Key Audit Matters in the Independent Auditor’s Report, has introduced the concept of Key Audit Matters in which the auditor highlights the most significant matters of the audit.

This provides investors and other users with a valuable insight into the external audit process. The FRC had previously moved ahead of the IAASB in this regard and introduced a similar requirement for accounting periods commencing on or after 1 October 2014.


What more can we do?

As the audit profession comes under further scrutiny, and questions are raised about the role and purpose of audit, it may be time to revisit some of the other recommendations in the Future of Assurance Report which were not adopted.

Some of these might include:

  • Proposals to widen the auditor’s responsibility in relation to the front half of the annual report, including requiring an opinion that the annual report (excluding the financial statements) is balanced and reasonable; and
  • Greater engagement between companies and investors in the quality of their reporting and the assurance provided on that reporting to provide investors with clearer insight into the reporting and assurance processes.

Conclusion

The Future of Assurance report highlighted that effective capital markets need trust in the integrity, skill and competence of a company’s directors and in the company’s reporting function. The role of assurance, generally provided by the audit profession, is to inspire trust in corporate reporting.

This statement is as relevant now as it was in 2010, and ICAS will be drawing upon the findings, and subsequent impact, of our 2010 report when we produce our response to the 2018 CMA audit market study.

Bruce Cartwright: Audit debate off and running

By Bruce Cartwright CA, ICAS CEO

10 October 2018

The future of assurance report

Download The Future of Assurance Report - The report calls for change in order to provide greater transparency and accountability…

2022-11-mitigo 2022-11-mitigo
ICAS logo

Footer links

  • Contact us
  • Terms and conditions
  • Modern slavery statement
  • Privacy notice
  • CA magazine

Connect with ICAS

  • Facebook (opens new window) Facebook Icon
  • Twitter (opens new window) Twitter Icon
  • LinkedIn (opens new window) LinkedIn Icon
  • Instagram (opens new window) Instagram Icon

ICAS is a member of the following bodies

  • Consultative Committee of Accountancy Bodies (opens new window) Consultative Committee of Accountancy Bodies logo
  • Chartered Accountants Worldwide (opens new window) Chartered Accountants Worldwide logo
  • Global Accounting Alliance (opens new window) Global Accounting Alliance
  • International Federation of Accountants (opens new window) IFAC
  • Access Accountancy (opens new window) Access Acountancy

Charities

  • ICAS Foundation (opens new window) ICAS Foundation
  • SCABA (opens new window) scaba

Accreditations

  • ISO 9001 - RGB (opens new window)
© ICAS 2022

The mark and designation “CA” is a registered trade mark of The Institute of Chartered Accountants of Scotland (ICAS), and is available for use in the UK and EU only to members of ICAS. If you are not a member of ICAS, you should not use the “CA” mark and designation in the UK or EU in relation to accountancy, tax or insolvency services. The mark and designation “Chartered Accountant” is a registered trade mark of ICAS, the Institute of Chartered Accountants of England and Wales and Chartered Accountants Ireland. If you are not a member of one of these organisations, you should not use the “Chartered Accountant” mark and designation in the UK or EU in relation to these services. Further restrictions on the use of these marks also apply where you are a member.

ICAS logo

Our cookie policy

ICAS.com uses cookies which are essential for our website to work. We would also like to use analytical cookies to help us improve our website and your user experience. Any data collected is anonymised. Please have a look at the further information in our cookie policy and confirm if you are happy for us to use analytical cookies: