The Professional Oversight Board (“the Oversight Board”), part of the Financial Reporting Council, today publishes a description of those entities whose audits will be deemed to be “major audits” for the purposes of audit inspections in the year from 1 April 2010 to 31 March 2011 (“2010/11”). Such audits come within the scope of the work of its independent Audit Inspection Unit (“the AIU”) in 2010/11.

The Board has chosen to simplify the definition of UK unquoted companies, limited liability partnerships and industrial and provident societies to include all such entities having either a Group turnover greater than £500m or having a Group turnover in excess of £100million and external long term debt in excess of £250million. The Board has also chosen to include all banks incorporated in the UK as a separate category. No other significant changes have been made to the AIU’s scope of inspection.

The Board has agreed that the AIU should have particular regard during its inspection work in 2010/11 to audit issues relating to segmental reporting, revenue recognition and fraud and continue to focus on going concern, fair value accounting estimates, asset impairments and compliance with ethical standards.

The Oversight Board welcomes comments on the scope of independent inspection by the AIU. Any such comments received during the year will be taken into account when the scope is next reviewed in March 2011.

Dame Barbara Mills, Chair of the Oversight Board, said:

“The Board continues to have regard to the level of public interest involved and has determined that the level of current public interest in banks means that these should be included as a separate category.

The challenges of the recession still present heightened audit risks in a number of areas and the AIU will continue to have particular regard during 2010/11 to those risks.”
 

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:
3. • a statutory obligation to oversee the regulation of auditors by the recognised accountancy bodies;
   • the monitoring of the quality of the auditing function in relation to economically significant entities;
   • independent oversight of the regulation of the accountancy profession by the professional accountancy bodies;
   • independent oversight of the regulation of the actuarial profession by the professional actuarial bodies.
4. 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.
5. 'The Audit Inspection Unit: Scope of Independent Inspection 2010/11' is available on the FRC website at http://www.frc.org.uk/pob/audit/.
6. Press enquiries should be directed to Andrew Jones, AIU Director, on 020 7492 2360.