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Technical Advisory Group Meeting Minutes (22/06/2022)
AGENDA
Minutes of previous meeting were agreed.
Ethics (10-11am)
1. Revised Public Interest Entity (PIE) definitions (UK Government Response & IESBA) - impact on FRC Ethical Standard and Other Entities of Public Interest (OEPI) scope.
Many firms were interested to hear the FRC's thinking about the implications of potential changes to the definition of PIEs by the UK government, and changes being made by IESBA. Specific questions related to the category of OEPIs, and whether it would be retained.
The FRC confirmed that no decisions have been taken in respect of OEPIs, but that the implications of changes to the PIE definition would be included in the next review of the Ethical Standard.
2. 2022 revision of the FRC Ethical Standard.
FRC confirmed that a review of the Ethical Standard would be launched in the second half of calendar year 2022. The key drivers were:
- Audit market reform and changes to the IESBA Code
- Learning from the implementation of ES 2019
- Identification of opportunities to clarify current requirements
The FRC asked the group to provide any areas of the ES 2019 which they felt could be enhanced, and for expressions of interest to join a working group.
3. Proposed IESBA revisions to definition of engagement team and group audits
One firm asked whether IESBA changes regarding the engagement team and any future Managed Shared Audit (MSA) regime might affect application of the auditing standards.
The FRC noted that any finalised MSA policy would need to be considered in the context of UK and international Ethical requirements and that any necessary clarifications or enhancements would be made in the UK. The detail of this work however would need to wait until any such MSA policy is agreed and finalised.
4. Permissibility of non-audit services for a Lloyd's Syndicate (OEPI): Provision of a report and opinion to Lloyd's on the reserves set by management in a Statement of Actuarial Opinion
One firm was looking to understand current market practice.
FRC Action: The FRC agreed to put this item on a future TAG agenda
5. The Objective Reasonable and Informed Third Party Test (ORITP)
The group discussed the possible areas of deficiency with current practice, and ways the test might be enhanced.
The FRC reiterated the importance of non-practitioner perspectives, and sometimes struggle to see evidence of this in waiver applications etc.
Firms were keen to better understand FRC expectations, and asked if it would be possible to see anonymised cases from AQR inspections or fee waiver applications where FRC has found practice to be lacking.
The FRC identified this as an issue to be taken to the new 'audit sandbox' but urged firms to continue to consider how to enhance current practice.
6. Use of specialists for briefing audited entities
One firm raised the issue of the use of specialists on an audit, including those that may be involved in meetings, workshops or briefings with the audited entity. The specific issue was the extent to which these specialists may potentially be providing non-audit services rather than being an integral part of an audit.
A 'decision tree' paper was being drafted which the FRC agreed would be appropriate for the TAG, or a sub-group of TAG to consider.
Audit (11am-12pm)
1. Professional Judgement Framework
The FRC updated the group about publication of the framework, and the associated 'expectations' paper.
The FRC will be conducting outreach with professional bodies, audit committee chairs, firms and international regulators and standard setters, including upcoming webinars.
The FRC welcomes feedback, and is willing (for example) to increase the suite of illustrative examples in the future.
2. Auditor Reporting Project
The FRC updated the group on the status of this project, which was started in response to the recommendations on auditor reporting in the Brydon report.
The FRC has partnered with a university to collect evidence on current practice across the FTSE 350 and the top end of AIM. The FRC will publish a series of infographics summarising this data, organised around key themes such as going concern, fraud and ESG.
Later in the year, the project will assess the decision usefulness of auditor reports, and whether there is merit in revising the ISA (UK) 700 series of standards or issuing guidance on it. In particular, the FRC will seek investor input into this part of the project.
4. AOB
ISA (UK) 600
It was clarified that the Exposure draft of revised ISA (UK) 600 contained limited 'UK plus' material, the vast majority of which related to UK specific law and regulation.