ICAEW proposes changes to the UK Audit Regulations and Guidance

ICAEW are proposing updates to the UK Audit Regulations, with the consultation open from 1 September 2023 to 27 October 2023. The revised regulations are expected to come into force in early-2024.

The proposed changes largely revolve around three main areas: appointing alternates, CPD requirements and regulatory penalties imposed on Responsible Individuals.

Alternates

To add greater consumer protection in the area of audit work, sole practices, including both sole practitioners and corporate practices with a single director, will be required to appoint an alternate regardless of whether they handle client money or are licensed insolvency practitioners, as is currently the case. Doing so should help to avoid the uncertainty that can arise for clients, employees and other stakeholders when a sole practitioner becomes incapacitated.

The ICAEW have also raised the prospect of future changes to require all sole practices providing any type of accountancy service to appoint alternates, however they also note that any such plans would involve further consultation.

Continuing Professional Development (CPD)

These changes are not unexpected given the new CPD Regulations issued by the ICAEW earlier this year and the changes simply incorporate references to the new CPD requirements.

If you would like a refresher on the updated CPD regulations, our blog explaining the changes can is a great starting point

Sanctioning of Individuals

The Audit Registration Committee (ARC) has until now only issued penalties and restrictions to firms and not to individuals. However, ICAEW have explained that there is an expectation that the FRC’s powers should be mirrored by the Recognised Supervisory Bodies (RSBs) where functions and responsibilities are delegated.

They also note that the new CPD requirements place responsibility on individuals as well as firms.

As a result, new powers to issue regulatory penalties and impose restrictions on Responsible Individuals (RIs) to be given to the ARC in addition to its existing powers. The proposed amendments to the ARC’s powers also include issuing restrictions that prohibit an employee from being involved in audit work and temporarily prohibit a principal or employee from exercising functions within the audit firm (for example from acting as the firm’s audit compliance principal).

There is a caveat, however, as the ICAEW have commented that the ARC will in most cases focus its enforcement action on the firm itself, with the firm then expected to follow its own internal processes in relation to RIs. The ARC will only exercise their proposed powers in relation to RIs if necessary in the circumstances, with examples of where an RI has failed to submit annual returns or failed to co-operate with CPD monitoring.

A Helping Hand from Mercia

As always with changes to the profession, we will keep you up-to-date with our insights and our blogs and podcasts so keep an eye out in the new year for any further updates from us on the new Audit Regulations.

In the meantime, we have a suite of training courses, both live and on-demand, to help you ensure your CPD requirements and needs are being met.

Our training includes face-to-face, live online, on-demand and in-house workshops to make sure it can always fit around your schedule.

For more details, explore how Mercia can help with your training needs