FRC consultation on EU audit legislation: The important changes
James Barbour, Director, Technical Policy highlights the key areas of the Financial Reporting Council's (FRC) consultation on the UK's implementation of the EU audit legislation.
The Financial Reporting Council (FRC) has published its consultation paper on proposed changes to its auditing and ethical standards to take account of the requirements of the EU Audit Regulation and Directive, both of which apply from 17 June 2016.
Changes are also being made to the FRC's UK Corporate Governance Code (the Code) as well as to its 'Guidance on Audit Committees' in order to align this with the new requirements.
The Directive requires minimum harmonisation of requirements at the European level and these are being transposed into UK law. The Regulation has a direct effect in law and requires maximum harmonisation at the European level. However, unusually for a regulation, it also includes various Member State options.
The FRC's proposed changes impact on the following:
- UK Corporate Governance Code
- International Standards on Auditing (UK and Ireland)
- Ethical standards for auditors
- Guidance on Audit Committees
The FRC has reflected on the results of its earlier consultation (December 2014) in arriving at its proposals for implementing the requirements (for which it has been granted authority) of the Regulation and Directive. It is also involved in ongoing discussions with the Department of Business, Innovation and Skills (BIS) and the European Commission (EC) with regards to the requirements of the EU legislation.
The FRC is also taking the opportunity to include necessary revisions to its auditing standards caused by recent revisions to the IAASB's standards at the same time as making the necessary changes to implement the Regulation and Directive. The FRC highlights in the consultation, areas where it proposes to implement additional requirements that go beyond those proposed by the European Union or the International Audit and Assurance Standards Board (IAASB). The consultation also highlights how the FRC is proposing to deal with certain aspects of the Competition and Market Authority's (CMA) Orders.
The consultation paper can be viewed at frc.org.uk.
Share your views
Views are sought from members on any aspect of the FRC's consultation. These should be sent to firstname.lastname@example.org by no later than 15 November 2015.