The Professional Oversight Board announces the Scope of the Audit Inspection Unit's Work for 2011/12
News types: Publications
Published: 21 March 2011
The Professional Oversight Board 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 2011 to 31 March 2012. Such audits will fall within the scope of the work of its Audit Inspection Unit (“the AIU”). The AIU selects the audits it reviews from this population, using a risk-based approach.
The Board decided last year to bring all UK incorporated banks within the scope of inspection in 2010/11. This greater level of focus on the banking sector will continue in 2011/12. The Board has also decided to remove the assets threshold previously applied for building societies. All UK building societies will therefore fall within scope in 2011/12.
The Board has also decided to simplify the definition of UK unquoted companies, limited liability partnerships and industrial and provident societies within scope by applying only a turnover measure from 2011/12.
There are no other significant changes to the statutory scope of the AIU’s work for 2011/12.
The Board has agreed that the AIU should have particular regard in 2011/12 to fair value accounting estimates and disclosures, impairment of assets, revenue recognition, related parties and going concern, including whether appropriate professional scepticism has been applied in these areas. It will also place emphasis on the quality of reporting to Audit Committees and assess how the revised Auditing Standards that became effective from December 2010 financial year-ends (“Clarified ISAs”) are being applied by firms and individual audit teams in practice.
The Board welcomes comments on the scope of the AIU’s work. Any comments received are taken into account by the Board in reviewing the AIU’s scope each year.
Dame Barbara Mills, Chair of the Board, said:
“Current economic conditions continue to present heightened audit risks in a number of areas and business sectors. The AIU will have particular regard to those risks during its 2011/12 inspections.”
Notes to Editors
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This Press Notice refers to audits within the scope of inspections carried out by the AIU to meet the requirements of UK company law. The audits of certain companies incorporated in Jersey, Guernsey and the Isle of Man whose shares are admitted to trading on a regulated market in the EEA will become subject to inspection by the AIU from 2011/12 under separate arrangements agreed with the relevant regulatory bodies.
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The Financial Reporting Council (FRC) is the UK’s independent regulator responsible for promoting high quality corporate governance and reporting to foster investment.
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The Professional Oversight Board contributes to the achievement of the Financial Reporting Council’s overall aims and has four main responsibilities:
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a statutory obligation to oversee the regulation of auditors by the recognised accountancy bodies;
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the monitoring of the quality of major audits;
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independent oversight of the regulation of the accountancy profession by the professional accountancy bodies;
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independent oversight of the regulation of the actuarial profession by the professional actuarial bodies.
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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.