Mercia Newswire March 2021

Reform of the UK's audit regime

BEIS has launched its long-awaited consultation on the overhaul of the audit regime, which aims to break up dominance of the Big 4 audit firms, improve corporate transparency and restore business confidence. The consultation adopts many of the recommendations of the recent Kingman, Brydon and Competition and Markets Authority’s reviews that followed a series of high-profile corporate failures, and includes wide-ranging proposals including the replacement of the FRC with the more powerful Audit, Reporting and Governance Authority (AGRA). With those wishing to comment on the consultation having until 8 July 2021 to do so.

For more information on the proposed reforms you can read our blog here or watch a short video about the consultation here.  

Companies House resumes normal service

Companies House has confirmed it has resumed its usual strike-off process from 8 March. The process had previously been suspended in April 2020 and resumed in October 2020 before being suspended again in January 2021 to reflect covid-related processing delays.

Also coming to an end is the filing deadline extensions that were introduced last Summer. Regarding the filing of accounts, the temporary three-month extension only applied where the normal filing deadline fell between 27 June 2020 and 5 April 2021 inclusive, so those companies and LLPs with normal filing deadlines from 6 April 2021 will need to file their accounts within the normal period for doing so. Also returning to normal from 6 April are the deadlines for filing the annual confirmation statement and event-driven filings such as changes to directors and PSC Register information.

Reporting on the Corporate Governance Code 

The FRC has published further guidance relating to Corporate Governance Code reporting, emphasising to companies the requirement to be transparent in their "comply or explain" reporting when they depart from certain provisions of the Code, including explicitly referring to the provisions of the Code which have not been complied with.  

Company AGMs in the time of COVID

The Chartered Governance Institute has issued new guidance about company AGMs, recognising ongoing difficulties in holding in-person meetings. The guidance emphasises that based on the UK government’s roadmap, in person meetings may well be legal at the end of March and in this case companies will need to offer shareholders a chance to attend a physical event, but also asks companies to look at offering hybrid events if their Articles do not rule this out.

Solicitors

The ICAEW has published a new technical release providing guidance on Solicitors Accounts Rules engagements, which takes account of changes to those rules that took effect from 25 November 2019. TECH 01/21 AAF replaces the previous guidance that was available and includes background to the rules as well as providing guidance on the practical implications for reporting accountants from planning the engagement through to reporting matters to the Solicitors Regulation Authority.  

Operational separation of audit firms 

In advance of the proposals to reform the audit profession the FRC has updated its principles relating to operational separation of the audit practices of the "Big Four" firms, as firms move into the implementation stage. The changes to the principles add more requirements for instance relating to situations where the audit practice passes fees to other parts of a firm.  

Virtual reality in reporting 

The FRC's Financial Reporting Lab has issued a report on the use of virtual and augmented reality in corporate reporting, suggesting this may have an increasingly important role in investor communications in modern times where digital rather than physical contact has become the norm.  

Narrow scope amendments to IFRS

The IASB has published amendments to IFRS designed to improve accounting policy disclosures and to clarify the distinction between accounting policies and accounting estimates. These changes affect IAS1 Presentation of Financial Statements and IAS8 Accounting Policies, Changes in Accounting Estimates and Errors along with IFRS Practice Statement 2 Making Materiality Judgements and will be effective for reporting periods commencing on or after 1 January 2023, with early application permitted. 

Keeping assurance standards in line with quality management standards

The IAASB has issued an exposure draft of conforming changes to other assurance standards to keep them in alignment with the proposed new quality management standards that are effective from 2022. In general, the changes do not affect meaning or practice, but are focused on updating references and terminology. The UK's FRC is consulting already on adopting a UK version of the quality management standards so is likely in due course to propose a similar set of amendments to those standards that have been adopted in the UK.