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ICAEW response to the FRC’s proposed new Assurance Standard

  • ICAEW (Institute of Chartered Accountants in England and Wales) (lt green) Image

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.

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