FRC consults on adopting international auditing standards to facilitate public assurance of insurers’ Solvency II reports
14 Jul, 2016
The Financial Reporting Council (FRC) has released a consultation on the adoption of International Standards on Auditing (ISAs) 800 (Revised) Special Considerations – Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks and 805 (Revised) Special Considerations – Audits of Single Financial Statements and Specific Elements, Accounts or Items of a Financial Statement in the UK.
The consultation document requests views on whether stakeholders believe it is appropriate to adopt these ISAs or if there is an alternative approach to support the Prudential Regulation Authority’s (PRA) proposed requirement for mandatory external audit of elements of Solvency II public reporting in the insurance sector.
Solvency II is a new prudential regulation regime for the insurance industry which came into force across the EU on 1 January 2016. It contains a new requirement for an annual public report (called the Solvency and Financial Condition Report (SCFR)) by most medium and large insurance companies. In the UK, the PRA is currently consulting on rules which require external audits of elements of published SFCRs to the level of 'reasonable assurance.' The FRC has considered three options to support the provision of such reasonable assurance:
- An engagement carried out using International Standard on Assurance Engagement (ISAE) 3000: Assurance Engagements Other than Audits of Reviews of Historical Financial Information;
- An engagement carried out using ISAs; or
- An engagement carried out using a specifically developed assurance standard.
Analysis of current ISAs (UK) has revealed that reasonable assurance engagements over public Solvency II regulatory returns may be difficult to achieve. However such engagements could be contacted in accordance with ISA 800 and ISA 805. Having completed an impact assessment, the FRC does not believe that adoption of these ISAs will result in significant additional costs or add to the regulatory burden on business but is seeking stakeholder views through this consultation.
The consultation period is open until 5pm on 3rd October 2016.
Click here to access the press release accompanying the consultation.
Click here to access the consultation document.
