News June 2014 FRC reminds audit firms of approaching deadline for terminating or amending contracts for tax servic

FRC reminds audit firms of approaching deadline for terminating or amending contracts for tax services provided on a contingent fee basis

25 June 2014
In December 2010, changes to Ethical Standards for Auditors became effective that prohibited firms from undertaking any tax services on a contingent fee basis for companies that they audit where the outcome is dependent on the proposed application of tax law which is uncertain or has not been established. Recognising that firms were likely to have a number of uncompleted engagements of the nature described above, the revised Ethical Standards contained a transitional provision permitting firms to continue with such engagements until the earlier of the completion of the engagement or 31 December 2011. In November 2011, following consultation, the transitional period was extended to 31 December 2014.

When announcing the extension of the transitional period, it was made clear that the transitional provision would not be revisited again at a later date as the new deadline was believed to provide sufficient time for audit firms to undertake an orderly process of termination or amending prohibited contracts which will not have been completed by this date.

The FRC reminds auditors that the deadline of 31 December 2014 is not being reviewed and that, where applicable, they will need to have undertaken the necessary to steps to terminate or amend such contracts, or to take other appropriate action so as to remain compliant with the Ethical Standards for Auditors, by 31 December 2014.

Notes to editors
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.