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Technical Advisory Group Meeting Minutes (30/09/2022)
FRC Technical Advisory Group Friday 30th September 2022 MINUTES
Minutes of previous meeting were agreed.
Ethics (10-11am)
1. Update on timings and working group re Revised Ethical Standard 2023 (including incorporating IESBA changes)
First working group meeting would hopefully take place in calendar year 2022, depending on availability. [update: initial meeting held January 2023]
The FRC invited further input on areas they would like to see covered in the project.
The FRC will share an abbreviated version of the topics to be covered. FRC Action [update: matters in scope shared at the initial meeting in January 2023]
2. Use of specialists
Deloitte had shared a paper with the FRC regarding the use of specialists in an audit engagement. This was with a view to potentially sharing with TAG. The FRC will feed comments back to Deloitte in the first instance. FRC Action [update: A revised version of the document is included on the February 2023 TAG agenda/papers pack.]
3. Breach reporting under ES 2019 Paragraph 1.21
The FRC noted that a process note was now included on the FRC's external website.
https://www.frc.org.uk/auditors/audit-assurance/processes-in-relation-to-pie-audits/ethics-breach-reporting-policy-for-auditors-of-pub
recirculated the process for reporting with the group and confirmed that it applies in respect of firms that audit PIE and OEPI entities, not just for PIE or OEPI audits.
4. Statements of Actuarial Opinion
The group discussed whether the provision of such statements for Lloyd's syndicates is a permitted service in the ES and if it is a service required by regulation.
The risk of self-review and self-interest threats was noted, and possible safeguards were discussed.
Meeting participants agreed that it would be helpful for both the FRC and firms to gain further insight on this issue, in advance of it being raised at the next TAG meeting. [update: This issue is to be included on the agenda for the February 2023 meeting]
5. Permissibility of securitisation services to UK PIEs / OEPIs under paragraph 5.40 of the Ethical Standard, where such services are not required by regulation, for example agreed upon procedures in relation to other asset backed transactions (public securitisations, private securitisations, unregulated covered bond programmes, significant risk transfers, portfolio sales/acquisitions)
Some firms felt these were permitted but should go into the fee cap calculation.
The FRC noted that if it could be established that these services were not included within the scope of the prohibited services list at Appendix B of ES 2019, then firms would still be required to identify which class of permitted services they would be included at paragraph 5.40 of ES 2019. [update: consideration should also be given to updates to the IESBA Code in respect of non-audit services. These are within scope of the 2023 revisions to ES 2019]
Audit (11am-12pm)
1. Update on Audit Sandbox and Objective and Reasonable Informed Third Party (ORITP) test
The FRC informed the group that the new audit and assurance sandbox will be starting work in early November and invited the group to suggest any topics they think would suit the initiative.
One firm suggested that the sandbox could look at how the definition of key audit partner works in the context of revised ISA 600 and the requirements on KAPs in ISA 220. [update: issues raised have been included in a list of potential sandbox initiatives, which will be evaluated in due course]
2. Update on Auditor Reporting Project
The FRC presented slides setting out findings and next steps.
The group discussed graduated and binary findings and their value and interest for investors. One firm noted that requirements on such additions to the auditor's report would make it fairer across companies, as some companies can feel they are negatively impacted compared to their peers if the auditor's report for their FS contains such extra detail.
Some firms mentioned that possibly releasing a standard in Q4 would be challenging to implement.
One firm asked if any revision to the reporting standards would look at ISA (UK) 570 as well and noted that ISA 701 is somewhat unintuitive.
[update: there have been numerous discussions with firms and other stakeholders to help inform the auditor reporting project. The project itself is now launched with a target completion date of Q4 2023]
3. Update on Professional Judgement Framework
The FRC gave an overview of its outreach activities around this publication and planned next steps. These included a webinar, article in the ICAEW magazine, bilateral conversations with firms and internal discussions with teams in supervision.
The FRC reiterated that they are happy to discuss implementation or other issues with firms and have had some such conversations already.
[update: the FRC are considering (via the external technology and assurance working group) an additional worked example relating to the use of new technology in an audit]