News April 2016 Revised UK Corporate Governance Code, Guidance on Audit Committees, and Auditing and Ethical Standar

Revised UK Corporate Governance Code, Guidance on Audit Committees, and Auditing and Ethical Standards

27 April 2016

The Financial Reporting Council (FRC) has today issued final draft updates to the UK Corporate Governance Code (PDF) and the associated Guidance on Audit Committees (PDF) to reflect forthcoming UK legislation on audit committees and auditor appointments. The FRC has committed to avoid further updates to the Code until at least 2019.

At the same time the FRC has issued final drafts of revised Auditing and Ethical Standards to support the work of audit practitioners in delivering high quality audit, and thereby underpin investor confidence. The revised standards reflect the FRC’s own review of ethical matters, changes to legislation which, after Parliamentary Scrutiny, are intended to take effect on 17 June 2016, and developments in international standards. The FRC has introduced all of the changes in a single revision to standards to ease the process of implementation as well as reduce costs.

The changes strengthen auditor independence by applying prohibitions to a range of engagements that could result in an auditor facing a conflict of interest. Reflecting the FRC’s commitment to proportionate regulation, the revised standards contain some reliefs which will allow, in certain circumstances, an auditor to provide additional assistance to smaller and medium sized entities.

The FRC has issued the final drafts now to enable companies and their auditors to familiarise themselves with the new requirements in good time.

Melanie Mclaren Executive Director Audit, said,

“The updates to the Code, Guidance and Standards implement a significant change in audit regulation in the UK which will be overseen by the FRC as a competent authority with the support of the accountancy professional bodies. The changes will support further innovation by the audit profession in the UK, and ensure that auditors act in a way that is genuinely independent and seen to be in the public interest. The UK has led the way on promoting audit transparency and competition on quality so that investors can have confidence in corporate reporting.”

Notes to editors:

1.    The FRC is responsible for promoting high quality corporate governance and reporting to foster investment. We set the UK Corporate Governance and Stewardship Codes as well as UK standards for accounting, auditing and actuarial work.  We represent UK interests in international standard-setting.  We also monitor and take action to promote the quality of corporate reporting and auditing. We operate independent disciplinary arrangements for accountants and actuaries; and oversee the regulatory activities of the accountancy and actuarial professional bodies.

2.    Read or download the Feedback Statement and Impact Assessment: Consultation - Enhancing confidence in audit (PDF)
Read or download the Revised Auditing Standards 2016 (PDF)

Read or download the Revised Ethical Standard 2016 (PDF)

Read or download the Investor Briefing Note: Implementation of the Audit Regulation Directive (PDF)

3.    On 17 June 2016 changes in EU legislation in respect of statutory audit become effective. BIS, the FRC and other regulators have consulted on the UK implementation of these new requirements which is moving to finalisation. The FRC will confirm the final documents and their effective date once these legislative and regulatory processes are complete.