Finalised auditing standards come into force

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The FRC has published finalised International Standards of Auditing (ISAs) (UK) to implement European Union (EU) Audit legislation which became effective from 17 June 2016.

The finalised standards can be accessed on the FRC's website.

In April 2016, the FRC issued a final draft version of the ISAs, which have since been subject to some ‘Editorial and Consistency Amendments’ and these are now reflected in the finalised version.

These amendments are as follows:




References to   Standards (UK and Ireland) have been amended to Standards (UK) and references   to Ireland have been deleted, the Irish Auditing and Accounting Supervisory   Authority (IAASA) has been appointed as the Competent Authority for Audit in   Ireland, and will be responsible for issuing Standards for use in Ireland.

ES Part A 1

Footnote 6 amended   to refer to individual instead of ‘a principal or any other person’.

ES 1.79

Effective date   corrected to read ‘Firms may complete engagements relating to periods commencing   before 17 June 2016….(previously reference was to periods ending before this   date).

ES 4.34R (a)

Inserted wording   “provided to the audited entity and its controlled undertakings”.

ES 4.34R (a) and (b)

Inserted footnote 44 to clarify how the non-audit services cap is   applied i.e. the cap is based on average audit fees for the three consecutive   financial periods commencing on or after 17 June 2016. Therefore, for an   applicable company with a 30 June year end the first year that the cap will   apply will the year ending 30 June 2020.

Following the   appointment of a new auditor after that date the cap will apply from the   fourth financial period of that engagement. The cap applies when the audit   firm, or a member of its network, provides to a public interest entity that   it audits, its parent undertaking or its controlled undertakings, non-audit   services other than those referred to in Article 5(1) of the EU Audit   Regulation.

Effective Date

The FRC Ethical Standard becomes effective on 17 June 2016.

Transitional Provisions

Firms may complete engagements relating to periods commencing before 17 June 2016 in accordance with the FRC’s existing ethical standards, putting in place any necessary changes in the subsequent engagement period.

Engagements to provide tax services wholly or partly on a contingent fee basis to a listed entity relevant to an engagement that is not an SME listed entity (see paragraph 5.85 of Section 5 of Part B of the FRC ES), or a significant affiliate of such an entity, entered into before 17 June 2016 may continue until currently active services are completed in accordance with the engagement terms as long as:

  • the engagement was permitted under the existing ethical standards; and
  • safeguards established continue to be applied

A ‘currently active service’ is one where the entity has already asked the firm for advice in relation to a particular matter and the firm has commenced work in relation to that matter. It does not include advice on future matters that may, for example, be provided for in an open ended engagement/contract.


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