THE FRC’s decision to set auditing standards before international consensus has emerged could damage its global standing and create confusion for investors, the ICAEW has warned.
In a letter sent to the FRC, the institute suggested that attempts to influence the international debate on auditing standards by “acting first” would make it difficult for auditors to “prepare comprehensible audit reports” that meet both UK and international requirements and that such reports would be “cumbersome and repetitive”.
Last year, the FRC made changes to the UK’s auditing regime, including new reporting disclosures in which auditors must provide an overview of the scope of the audit showing how it addressed the risk and materiality considerations.
Those changes differ slightly from recommendations being considered at a global level by the IAASB. For instance, the IAASB proposals require going concern statements to be made in all cases while the FRC’s requirements do not. Additionally, the FRC’s requirement to report on the application of materiality would be dealt with as an ‘other matter’ rather than a ‘key audit matter’ under the IAASB’s proposals.
By acting alone, the FRC is “likely to weaken the UK’s influence internationally”, the ICAEW said in its response to the FRC’s invitation to comment on the IAASB proposals.
“There are well-resourced bodies within and outside the UK who are fully committed in word and deed to international standards on auditing and they will, quite naturally, be more clearly heard at the top table than jurisdictions which choose to go their own way,” the ICAEW said.
The institute went on to question the FRC’s very commitment to international auditing standards
“We do not really understand why the FRC is asking whether it should seek to implement the IAASB’s proposals in place of its own at this stage, when it has already made it clear by its actions that it does not intend to do so.
“We are concerned that the FRC’s actions indicate that it may no longer be committed to ISAs.”