In a bold move, the Financial Reporting Council (FRC) has unveiled proposed changes to auditing standards that could have a major impact on the financial world, according to chartered accountants and business advisors Whitley Stimpson.
The revisions, which were recently put forward in an exposure draft, aim to enhance auditor requirements when it comes to detecting and reporting material misstatements from non-compliance with laws and regulations.
The proposed changes would replace existing standards and introduce a more robust framework for auditors to follow. The FRC believes that these revisions will not only improve the quality of audits but also provide users of financial statements with greater assurance that potential misstatements have been thoroughly assessed.
One key aspect of the proposed revisions is the removal of the distinction between different categories of laws and regulations. Instead, auditors would be tasked with identifying all laws and regulations that could have a material effect on financial statements, assessing the risks of misstatement due to non-compliance, and obtaining appropriate audit evidence to address these risks.
The FRC also aims to introduce a more principles-based approach for auditors of public interest entities (PIEs) to report significant matters to regulators. This change would ensure that important information is shared with regulators, even if not explicitly required by law.
However, not everyone is on board with these proposed revisions. The Institute of Chartered Accountants of Scotland (ICAS) has expressed concerns about the potential impact on auditors, particularly in large international group audits. They believe that the proposed changes could lead to a significant increase in the need for legal and other experts to assist auditors in meeting the new requirements.
ICAS also raised issues regarding the proposed effective date for the revised standards, suggesting that more time is needed for audit firms to adjust their methodologies and provide training for their staff. They argue that the standards should not become applicable until after related legislation has been enacted and taken effect.
Laura Adkins, Director responsible for the audit of some of Whitley Stimpson’s bigger corporate clients says:
“As the debate continues, it remains to be seen how these proposed revisions will shape the future of auditing standards. Once the changes are set in stone, I will be able provide insight on how the regulations will affect businesses moving forward. Any companies that require guidance on new audit regulations are welcome to contact me for advice.”
For further information, contact Laura Adkins on lauraa@whitleystimpson.co.uk.