The Oversight Board today publishes its review of practical training for auditors. The objective of the review was to consider the effectiveness of the arrangements for the practical training of auditors in the UK in light of increases in audit exemption thresholds and resulting changes in the market structure for audit in the UK.

The review included all aspects of practical training including the approval and monitoring of training firms, student training records requirements, and the completion and monitoring of student training records. A research team from the University of Glamorgan, led by Professor Marriot, was jointly appointed by the Professional Bodies and the Oversight Board to independently gather the views of students and mentors.

The Oversight Board’s review drew seven conclusions which may be divided into profession wide and operational issues. The most significant profession wide issue, following increases in audit exemption thresholds, is the lack of availability of audit work in small audit firms to ensure trainees and audit staff can be provided with sufficient audit experience to achieve the audit qualification or to maintain competence at a reasonable cost once qualified. The review also found that the Bodies generally had effective operational procedures governing the arrangements for the practical training of auditors although the application of these procedures could be improved in certain areas. We will monitor progress by the Bodies in meeting our recommendations on their operational procedures during our routine compliance monitoring visits.

The ability for some students, in particular in smaller practices, to gain and maintain sufficient competence in audit is a complex cross-profession issue which is recognised by the Bodies. The next stage of this review will be the establishment of a working group of representatives from the Bodies and the Oversight Board to begin the process of identifying, assessing and prioritising possible actions. The outcome of these discussions will be shared with firms.

Paul George, Director of Auditing, said:

“Continuing confidence in the profession relies on maintaining the highest standards in the training of auditors. We welcome the support of the Bodies during this review and are heartened to see that they recognise the profession-wide concerns we have highlighted. We look forward to continuing to work with them to find ways to address the issues highlighted in this report.”

Review of Practical training for auditors is available on the FRC website at: http://www.frc.org.uk/pob/publications/index.cfm?mode=list&cID=7

1. 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 and Actuarial Discipline Board) and by the FRC Board. The Committee on Corporate Governance assists the Board in its work on corporate governance.
2. The Professional Oversight Board contributes to the achievement of the Financial Reporting Council’s own fundamental aim of promoting confidence in corporate reporting and governance. It has four main responsibilities:
   1. a statutory obligation to oversee the regulation of auditors by the recognised accountancy bodies;
   2. the monitoring of the quality of the auditing function in relation to economically significant entities;
   3. independent oversight of the regulation of the accountancy profession by the professional accountancy bodies;
   4. independent oversight of the regulation of the actuarial profession by the professional actuarial bodies.
      
3. The Professional Oversight Board is independent of the accountancy and actuarial professions. Its members have wide experience of business and the professions, the public sector, accountancy, auditing and actuarial work.
4. There are six recognised qualifying bodies in the UK; the Association of Chartered Certified Accountants (ACCA), the Association of International Accountants (AIA), the Chartered Institute of Public Finance and Accountancy (CIPFA), the Institute of Chartered Accountants in England and Wales (ICAEW), the Institute of Chartered Accountants in Ireland (ICAI) and the Institute of Chartered Accountants of Scotland (ICAS). CIPFA and the AIA were not included in this review since neither Body had any students in training during the period under consideration.
5. Press enquiries should be directed to Paul George, Director of Auditing, on 0207 492 2340 or email at: p.george@frc-pob.org.uk