The content on this page has been converted from PDF to HTML format using an artificial intelligence (AI) tool as part of our ongoing efforts to improve accessibility and usability of our publications. Note:
- No human verification has been conducted of the converted content.
- While we strive for accuracy errors or omissions may exist.
- This content is provided for informational purposes only and should not be relied upon as a definitive or authoritative source.
- For the official and verified version of the publication, refer to the original PDF document.
If you identify any inaccuracies or have concerns about the content, please contact us at [email protected].
Technical Advisory Group Meeting Minutes (28/02/2023)
Minutes of previous meeting were agreed.
Ethics (15.30-16.15)
1. Update on Ethical Standard Revision
The first working group meeting took place in January, the broad scope and objectives of the project were discussed at this meeting.
The FRC gave an overview of the key objectives of the revision including the clarification and incorporation of additional material that sits outside the Ethical Standard, alignment with IESBA and responding to FRC inspection/enforcement findings.
The FRC noted that public sector issues will be taken outside of the main working group and national audit agencies will be liaised with.
The second working group meeting will take place in March and papers with the proposed revisions will be circulated to TAG. [Action update – working group meeting covered section 5 of the ES]
2. Statements of Actuarial Opinion (from previous meeting)
The FRC's actuarial team had provided insight on the issue of whether providing such statements for Lloyd's syndicates represented a permitted service in the ES. There is a potential threat to independence as both the SAO and the audit opinion are based on the same financial model.
One firm noted that they had received tenders which included a quote request for both services; there may be a market for both services to be provided together.
Some firms felt that the overlap between the opinions and the self-review threat were no different to other types of work that the auditor carries out under permitted services. Others felt that these types of work were dissimilar to an SAO.
The group discussed expectations around safeguards.
3. Proposed Guidance: use of 'specialists' [appendix 2]
A revised version of Deloitte's paper regarding the use of specialists in an audit engagement had been included in the February 2023 TAG papers.
This discussion will be added to the agenda for the May 2023 meeting.
4. Update: Proposed SEP 2.4 Guidance
The latest version of this firm generated guidance has been reviewed by the FRC to ensure consistency with IESBA code changes.
The document was produced by several firms, as such it would not be appropriate for the FRC to publish it directly. To highlight that the document has been discussed by TAG, it will be added to the FRC website as an attachment to the minutes. [FRC Action]
Audit (16.15-17.00)
1. FRC introduction of a Sandbox initiative: Complex Audits
The aim of this initiative is to find innovative models for the involvement of challenger firms on complex FTSE 350 audits, while complying with standards.
Market opening measures aim to enable challenger firms to build capacity and capability. The FRC's Competition Policy team are looking to develop and test such measures in collaboration with audit firms.
Audit firms in scope are those who currently do/have recently done FTSE 350 audits. The audits in scope are FTSE 350 companies which are large and complex enough that work could be allocated to an unaffiliated auditor. There are already 10 specific FTSE 350 companies expecting to participate.
Bilateral discussions beginning in May 2023 will be held with participating firms and companies. Prior to these discussions, material on possible models will be shared with participants to stimulate dialogue. Procedures to assure confidentiality will be communicated prior to work beginning.
Audit firms are requested to share appropriate contacts with James Ferris and Ramana McConnon.
2. Sandbox: Update (including Objective Reasonable and Informed Third Party (ORITP) test)
The audit and assurance sandbox is now live and there is a list of live and potential issues. The FRC are open to proposals for additional issues which firms would like to talk through in the sandbox.
A series of initial questions around the ORITP test will be discussed shortly at a sandbox working group.
3. New Guidance: Eligibility for Appointment as Statutory Auditor
The FRC noted that this guidance is in the process of being finalised, with a view to it being published shortly.
The guidance provides clarity on the appointment eligibility criteria in the three contexts of KAPS, EQCRs and ultimate and operational responsibility for a system of quality management.
4. ISA (UK) 600: expectations of the level of audit work over components which are material in aggregate, but individually immaterial.
The group discussed expectations for work effort considering revised ISA (UK) 600, particularly in relation to smaller components. One firm mentioned that the revisions didn't automatically mean additional work was required, instead it encouraged better scoping of the audit effort.
Queries on the revisions will be fed back to IAASB.
5. Auditor's Reports – reporting on the extent to which the audit was considered capable of detecting irregularities, including fraud
The FRC presented slides setting out findings on practice and patterns in auditor reporting.
The group discussed investor expectations of auditor's reports, including the length of reports and the proportion of boilerplate text which covers generic auditor activities.
AOB
The FRC will consider the group's comments as part of the ongoing Auditor Reporting project.