FRC consults on proposals for the Audit Enforcement Procedure

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23 Mar, 2016

The Financial Reporting Council (FRC) has today issued a consultation on proposals for the Audit Enforcement Procedure, developed to implement its forthcoming responsibility for audit enforcement.

Proposals to implement the EU Audit Directive (2014/56/EU) (‘the Directive’) and Audit Regulation (537/2014) (‘the Regulation’) in the UK were consulted on in October 2015 by the Department for Business, Innovation and Skills (BIS).  The consultation included draft implementing regulations and draft amendments to the Companies Act to implement the changes required.  The Directive and Regulation were published in the Official Journal of the European Union in May 2014.  The Directive which amends the Statutory Audit Directive (Directive 2006/43/EC) (link to Europa website) applies to all audits required by EU law and the Regulation applies to all audits of “Public Interest Entities” (PIEs).  They come into force on 17 June 2016.

The BIS consultation indicated that the FRC will be the “single competent authority” – with ultimate responsibility for most matters of audit regulation and oversight.  The Audit Regulation requires that the competent authority conducts audit inspections, investigations and disciplinary cases in relation to Public Interest Entities (PIEs).  It can then delegate the conduct of inspections and investigations and application of sanctions for non-PIEs to the Recognised Supervisory Bodies (RSBs) (for instance the Institute of Chartered Accountants in England and Wales (ICAEW)).

In order to implement its mandatory responsibility for audit enforcement in relation to PIE and any specific non-PIE matters, the FRC has developed a new Enforcement Procedure upon which it is consulting on.  The consultation includes, within an appendix, the draft procedure.  Also included are supporting policy and guidance documents.

The FRC seeks responses by 4 May 2016.

The press release and full consultation are available on the FRC website.

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