FRC bulletin highlights auditor’s responsibility in relation to the Strategic Report and the Directors’ Remuneration Report

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10 Apr, 2014

The Financial Reporting Council (FRC) has today published a bulletin highlighting recent developments in UK company law, the UK listing rules and ISAs (UK and Ireland) that affect both the auditor’s responsibility and the wording of auditor’s reports on the financial statements.

The bulletin ‘Bulletin 4: Recent Developments in Company Law, The Listing Rules and Auditing Standards that affect United Kingdom Auditor’s Reports’ (“the bulletin”) covers: 

The introduction of the Strategic Report;

The option for companies to provide its members with a stand-alone ‘‘Strategic Report with Supplementary Material’’ in place of the company’s full accounts and reports. ‘‘The Strategic Report with Supplementary Material’’ replaces the previous option of providing a Summary Financial Statement;

Amendment of the Regulations that specify the information to be included in a quoted company’s Directors’ Remuneration Report;

Changes in the requirements of the Listing Rules with respect to directors’ remuneration disclosures; and

Changes to ISA (UK and Ireland) 700 ‘‘The Independent Auditor’s Report on Financial Statements’’ made in October 2012 and June 2013 and the issuance, in November 2013, of a Clarification Statement in respect thereof. 

The bulletin provides an explanation of each of these developments and the auditor’s responsibility in relation to the strategic report and the directors’ remuneration report.  The bulletin indicates that the directors have the same statutory reporting responsibility for the strategic report as they currently do for the directors’ report. 

The FRC note that they will update ISA (UK and Ireland) 720 to take into account these new auditor responsibilities “once the International Audit and Assurance Standards Board (IAASB) has finalised the revision of its equivalent standard”.  

The impact of these developments on auditor’s reports is also provided in the form of illustrative examples.  The changes to the director’s remuneration report have no impact on the auditor report. 

The bulletin includes two appendices that illustrate the impact that these developments have on financial statements prepared under the Financial Reporting Standard for Smaller Entities (FRSSE) and those prepared for a publicly traded premium listed group. 

The FRC comment that their bulletins are “persuasive rather than prescriptive, but are indicative of good practice”. 

Click for (all links to FRC website):

  • Press release
  • FRC bulletin: Bulletin 4: Recent Developments in Company Law, The Listing Rules and Auditing Standards that affect United Kingdom Auditor’s Reports

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