August

FRC seminar for audit committee members

18 Aug, 2015

The Financial Reporting Council (FRC) will hold its annual seminar for audit committee members on 15 October 2015 in London.

The seminar will discuss areas of the FRC’s work that are of relevance to audit committee members including the implications of other EU and UK regulatory changes to the audit market and the impact of those on audit tendering and rotation.  The seminar will also cover issues arising from the FRC’s programme of monitoring of audits and corporate reports and the impact of extended auditor and audit committee reporting in the UK.

More information, including how audit committee members can attend the seminar, can be found on the FRC website.

NAO consults on guidance for auditors of value for money audits

18 Aug, 2015

The National Audit Office (NAO) has published a consultation seeking views on proposed guidance to auditors in relation to their statutory duty under the Code of Audit Practice (“the Code”) to be satisfied that audited bodies have proper arrangements in place to secure value for money in their use of resources.

Under the Local Audit and Accountability Act 2014 (“the Act”), the Comptroller and Auditor General (C&AG) are responsible for preparing and maintaining the Code.  The Code sets out what local auditors of relevant local public bodies (as defined in Schedule 2 of the Act) are required to do to fulfil their statutory responsibilities under the Act.  The requirements for auditors to be satisfied that audited bodies have proper arrangements in place to secure value for money in their use of resources are included within Chapter Three of the Code. 

The NAO are consulting on guidance issued by the C&AG.  Under the Act, the C&AG has the power to issue guidance which auditors must ‘have regard’ when carrying out their work. 

This proposed guidance will apply to audits of 2015/16 accounts onwards and will also apply to Foundation Trusts.

Comments are invited until 30 September 2015.  Finalised guidance is expected to be published in November 2015.   

The full consultation is available on the NAO website.

Study of the CFA Institute on the influence of ESG disclosures on investment decisions

18 Aug, 2015

The CFA Institute, a global association of investment professionals, has published 'ESG Issues in Investing: Investors Debunk the Myths'. The study shows that almost three-quarters of investment professionals worldwide take environmental, social, and corporate governance (ESG) issues into consideration in the investment process.

The report presents the results of an online survey that was conducted from 26 May to 5 June 2015. Some 1,325 members of CFA Institute who are portfolio managers or research analysts responded to the survey for a response rate of 3 percent.

Key findings of the survey are:

  • 63% percent of survey respondents said they consider ESG information in the investment decision making process to help manage investment risks, 44% include ESG evaluation on demand of their clients/investors, and 38% see ESG performance as a proxy for management quality.
  • Board accountability, human capital, and executive compensation were cited as the issues most important to investment analysis and decision-making.
  • In the Asia-Pacific region, ESG issues are considered by 78% of the respondents; investors in the Europe, Middle East, and Africa (EMEA) region follow with 74%; in the Americas region still more than half (59%) consider ESG factors.
  • 57% of respondents integrate ESG into the whole investment analysis and decision-making process; 38% use best-in-class positive alignment. 36% use ESG analysis for exclusionary screening.  
  • 61% of survey respondents say that public companies should be required to report at least annually on ESG factors, and 69% of these believe that these disclosures should be subject to independent verification.

Please click to access the full report on the CFA Institute's website. A webinar reviewing the findings is archived on YouTube.

ICAEW response to the BIS consultation on company beneficial ownership register

17 Aug, 2015

The Institute of Chartered Accountants in England and Wales (ICAEW) has published its comment letter on the consultation by BIS (The Department for Business, Innovation and Skills) on the implementation of a register of Persons with significant control (PSC register).

UK companies will be required to keep a PSC register of people with significant control over the company (those individuals who own or controls more than 25 per cent of a company’s shares or voting rights or who otherwise exercises control over a company or its management).  The PSC register will need to include details on the individuals including name, date of birth, nationality, address and details of their interest in the company.  Companies will be required to keep the PSC register up to date.

BIS previously consulted on how to implement these requirements and what guidance would be required to help companies and others understand and comply with them.  It is now consulting further on the draft secondary regulations needed to set up the register.

ICAEW notes in its response that the new regime will need to be revisited within the next two years to ensure that it complies with the revised EU Money Laundering Directive (link to Directive) requirements, which will cause more disruption to business at that time. In its view, the government could consider postponing some or all of the PSC register proposals so that they are introduced concurrently with the new Directive’s implementation.

It believes that the implementation of the register will create an additional burden for business and questions to what extent the proposed regime will meet government’s stated aims and refers to its comments on the government’s June 2013 consultation on the same topic, many of which it believes remain relevant.

The full comment letter and responses raised to all questions in the invitation to comment is available on the ICAEW website.

ICAEW response to the FRC’s proposed new Assurance Standard

17 Aug, 2015

The Institute of Chartered Accountants in England and Wales (ICAEW) has published its comment letter on the Financial Reporting Council’s (FRC’s) exposure draft of a proposed new Assurance Standard over client assets.

Where an entity holds client assets the FCA's Supervisory Manual (SUP rules) require the CASS auditor, annually, to provide a Reasonable Assurance Client Assets Report and to report, among other things, on whether the entity has adequate systems in place to safeguard their client assets.  Where an investment business claims not to hold client assets, a Limited Assurance Report is required. 

The Assurance Standard Providing Assurance on Client Assets to the Financial Conduct Authority has been developed to support and challenge auditors when providing these reports.  The proposed new Standard will contain requirements relating to: reasonable assurance engagements, limited assurance engagements, special reports and non-statutory client money trusts.

ICAEW supports the FRC’s proposal to issue a new Assurance Standard. However, ICAEW believes there is a risk that, in moving from the current Bulletins that cover this topic to an Assurance Standard, a significant body of useful material has either been deleted or been moved to the “Contextual material” accompanying the proposed Standard. As a result, the draft may contain too little guidance for CASS auditors, especially small CASS audit firms.

ICAEW also identifies fundamental concerns in relation to:

  • The limited recognition of proportionality and limited scope within the proposed standard for the CASS Auditor to adopt a risk based approach in terms of reliance on controls testing and materiality thresholds, which would be used under other Assurance frameworks.
  • The lack of detail as to what the assurance practitioner is expected to do to give a reasonable assurance opinion over non-standard approaches undertaken by regulated firms as to the equivalence of their arrangements with the standard rules.
  • The assumption that there would not be a need for reports to deviate from the FCA’s template.

The institute believes that these could undermine the ability of the proposed Assurance Standard to meet its objectives.

The full comment letter and responses raised to all questions in the invitation to comment is available on the ICAEW website.

IFRS Foundation translations

17 Aug, 2015

The IFRS Foundation has announced the publication of new Finnish, French and Spanish translations.

  • Finnish translation of IFRS 9 Financial Instruments, available via the IASB's Web shop
  • Spanish translation of the Exposure Draft Remeasurement on a Plan Amendment, Curtailment or Settlement/Availability of a Refund from a Defined Benefit Plan (June 2015), available free of charge on the IASB's comment on a proposal webpage
  • Spanish translation of the Basis for Conclusions for the Exposure Draft Conceptual Framework for Financial Reporting (May 2015), available free of charge on the IASB's comment on a proposal webpage
  • French translation of the 2015 International Financial Reporting Standards, available on the IASB's eIFRS website
  • French translation of the Exposure Draft Effective Date of Amendments to IFRS 10 and IAS 28 (August 2015), available free of charge on the IASB's comment on a proposal webpage

Second instalment of the IASB's Conceptual Framework webcast series

13 Aug, 2015

In August 2015, the IASB launched a webcast series on the proposed changes to its Conceptual Framework. Eight pre-recorded webcasts will be posted to the IASB's website weekly. The second instalment was posted today.

The on-demand webcasts will provide detailed discussions of each part of the IASB's May 2015 Exposure Draft, ED/2015/3 Conceptual Framework for Financial Reporting.

The webcast on Chapter 4 — A closer look at liabilities and executory contracts is available today. For information about the upcoming webcasts and a complete archive, see the webcast page on the IASB's website.

FASB issues ASU deferring the effective date of the new revenue standard

12 Aug, 2015

The FASB has issued an ASU, “Revenue From Contracts With Customers (Topic 606): Deferral of the Effective Date,” which defers for one year the effective date of the new revenue standard for public and nonpublic entities reporting under U.S. GAAP.

For public business entities, as well as certain nonprofit entities and employee benefit plans, the effective date is annual reporting periods, and interim periods therein, beginning after December 15, 2017. The effective date for all other entities is one year later than this (i.e., December 15, 2018). Early adoption is permitted only as of annual reporting periods, and interim periods therein, beginning after December 15, 2016.

The IASB expects to issue its formal amendment to defer IFRS 15 in September.

For more information, see the press release and ASU on the FASB’s Web site.

EFRAG publishes July 2015 issue of 'EFRAG Update'

12 Aug, 2015

The European Financial Reporting Advisory Group (EFRAG) has published an 'EFRAG Update' summarising public technical discussions held and decisions made during July 2015.

The Update reports on the meetings of the EFRAG Board on 21 and 22 July and conference call on 29 July, the meeting of the EFRAG Technical Expert Group (EFRAG TEG) on 9 - 10 July as well as the joint EFRAG TEG and CFSS meeting on 8 July.  The Update also lists EFRAG publications issued in July:

 Please click to download the July EFRAG Update from the EFRAG website.

IFRS Foundation publishes updated briefing for chief executives

11 Aug, 2015

The IFRS Foundation has published '2015 IFRS—A Briefing for Chief Executives, Audit Committees and Boards of Directors'. The Briefing provides a broad, non-technical overview of Standards required for annual reporting beginning on 1 January 2015.

The Briefing includes a summary of the significant judgements and estimates to be made by those preparing financial statements that are compliant with IFRS. It also contains summaries of IFRS 9, IFRS 14 and IFRS 15.

eIFRS and Comprehensive subscribers can access an electronic version of the Briefing via the Latest Additions section of eIFRS (you will be required to provide your login details). Hard copies of the Briefing are also available for ordering through the IASB's Web Shop. Copies are priced at £32 each, plus shipping. Discounts are available for multiple copies, academics/students and residents of middle and low-income countries.

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