APB issues new guidance for smaller entity audit documentation

APB PN 72 24 September 2007 Smaller Entity Audit Documentation’ and has withdrawn Practice Note 13: ’The audit of small businesses’ with immediate effect. Practice Note 26 provides guidance on how the special considerations of a smaller entity audit impact the working papers that an auditor needs to prepare. A consultation draft of this guidance was issued for public comment, in January 2007, and was widely supported. There has been strong support for the need for guidance of this nature internationally and input to the project has been provided by the staff of the IAASB and a number of national standard setters. One specific issue on which the APB sought views was whether it should promulgate the illustrative examples of working papers that were included as an appendix to the consultation draft. In the APB’s view this issue is closely linked with how auditors, especially in smaller audit practices, learn how to apply auditing standards in an efficient and effective manner without undue bureaucracy. Although in the APB’s view audit training is the responsibility of the accountancy bodies, the overwhelming majority of respondents to the consultation (including most of the accountancy bodies) encouraged the APB to issue this material and the APB has, with some reluctance, concurred with these views. Richard Fleck, Chairman of APB commented: “Commentators were strongly supportive of the draft guidance, which they thought would assist small practitioners apply the audit risk standards in a consistent and cost effective manner. While we are delighted that the guidance has been well received, the APB is concerned that this should not be taken as an acknowledgement by the APB that it will, or should, assume responsibility for training and implementation support on auditing standards. The question of how best to train auditors in auditing standards remains and the APB plans to discuss this issue with the accountancy bodies over the coming months in order that the UK is well-prepared for future changes in auditing standards.” Copies of the document may be downloaded from the Publications (Practice Notes) section of this website. Printed copies, at a cost of £10.00, can be obtained from: FRC Publications 145 London Road Kingston upon Thames Surrey KT2 6SR Telephone: 020 8247 1264 Fax: 020 8247 1124 E-mail frcpublications.com Website www.cch.co.uk Notes to Editors The Financial Reporting Council (FRC) is the UK’s independent regulator responsible for promoting confidence in corporate reporting and governance. Its functions are exercised principally by its operating bodies (the Accounting Standards Board, the Auditing Practices Board, the Board for Actuarial Standards, the Financial Reporting Review Panel, the Professional Oversight Board and the Accountancy & Actuarial Discipline Board) and by the Council. The Committee on Corporate Governance, whose members are drawn from the Council, assists it in its work on corporate governance.  The APB is committed to leading the development of auditing practice in the United Kingdom and the Republic of Ireland so as to: establish high standards of auditing;  meet the developing needs of users of financial information; and   ensure public confidence in the auditing process. The guidance in Practice Note 26 is directed to auditors of companies that are exempt from audit but choose nonetheless to have a voluntary audit and other smaller entities such as charities. The guidance may also be helpful to auditors of larger entities where: Ownership of the entity is concentrated in a small number of individuals (sometimes a single individual) who are actively involved in managing the business; and the operations are uncomplicated with few sources of income and activities; and  business processes and accounting systems are simple; and  internal controls are relatively few and may be informal. All press enquiries should be directed to: Jon Grant on Tel: 020 7492 2410.