Newswire August 2022

AUDIT & ACCOUNTING

FRC publishes regulations for PIE Auditor Register

The FRC has published the regulations for the upcoming PIE Auditor Register, following the Government’s response to the consultation on Restoring trust in audit and corporate governance.

From 5 December 2022, all audit firms and responsible individuals who undertake statutory audit work for Public Interest Entities (PIEs) will need to be registered by the FRC. Audit firms currently auditing PIEs will need to apply and be approved to be included on the PIE Audit Register to prevent any disruption to their work. There will be a transition period from 5 September to 4 December 2022 for existing audit firms of PIEs to submit transitional applications.

FRC publishes snapshots of current practice in auditor reporting

The Financial Reporting Council (FRC) has published research into the state of auditor reporting in the UK. A series of six infographic ‘snapshots’ provide an in-depth look at the length and readability of auditors’ reports, as well as how auditors communicate how the audit was performed, the risks they identified, and the responses to those risks.

The six snapshots are as follows:

• Snapshot 1: Understandability and usability of auditor reports
• Snapshot 2: Communicating judgements on materiality and the scope of group audits
• Snapshot 3: Key audit matters
• Snapshot 4: Key audit matters on climate change, COVID-19, alternative performance measures, and graduated findings
• Snapshot 5: Going concern
• Snapshot 6: Fraud and other irregularities

FRC Publishes Key Facts and Trends in the Accountancy Profession

The FRC has published the 20th edition of its Key Facts and Trends (KFAT) report, which provides statistical information and trends on the members and students in the accountancy profession.

This year’s report shows that Membership of the accountancy bodies continues to grow, with over 385,000 members in the UK and Republic of Ireland and over 590,000 members worldwide. The number of accountancy students in 2021 the UK also increased by 0.3% to 162,000.

The report also looks at trends in the audit market and found that the five largest challenger firms outside the Big Four continued to increase their share of the FTSE 350 audit market, auditing 24 companies in 2021, compared to 19 the previous year.

FRC publishes recommendations to improve digital security disclosure

The FRC Lab (Lab) has published a report on digital security risk disclosure to help companies improve the disclosure of digital security strategies, risks and governance. With the continued digitisation of the economy, digital security risk is increasingly becoming fundamental for an investor's understanding of a business. However, the FRC's research showed that disclosures are not meeting investor needs effectively and companies need to improve to address this.

FRC publishes review of judgements and estimates

The Financial Reporting Council (FRC) has published an updated version of its thematic review of judgements and estimates.

Companies are required to disclose their more complex accounting judgements, as well as the most significant sources of estimation uncertainty to allow readers to assess how the accounting policies applied have been affected by the judgements taken by management. The original thematic review was published in November 2017. The updated review has identified some improvement in the overall quality of judgement and estimate disclosures since the 2017 report but also identified areas where there is room for further improvement.

FRC publishes guidance on running effective AGMs

The Financial Reporting Council (FRC) has released new guidance for listed companies to enhance effective shareholder participation when planning and conducting AGMs. This is the first time the FRC has published specific guidance on the topic.

FRC publishes latest audit quality review results

The Financial Reporting Council (FRC) has published its annual inspection and supervision results of the largest audit firms (BDO, Deloitte, EY, Grant Thornton, KPMG, Mazars and PwC). Overall, 75% of audits inspected were good or required limited improvement (compared to 71% in 2021 and 67% in 2020).

ICAEW guidance on CVAs under FRS 102

The ICAEW has published a technical helpsheet issued to help members to account for a Company Voluntary Arrangement (CVA). The helpsheet addresses the question as to how and when the effects of a CVA are to be reflected in the financial statements of the company under FRS 102. This is only available to ICAEW members.

CHARITIES

Charity Commission guidance about the changes being introduced Charities Act 2022:

The Charity Commission has published guidance about changes planned to come into effect in autumn 2022. Further guidance will be published about the changes planned to apply in 2023.

The guidance published addresses inter alia:

• Paying trustees for providing goods to the charity
• Making moral or ‘ex gratia’ payments from charity funds
• Fundraising appeals that do not raise enough or raise too much
• Power to amend Royal Charters

MONEY LAUNDERING

Client Due Diligence case studies

The CCAB has published four client due diligence case studies to assist the profession in dealing with its obligations in this area.

1. High risk jurisdiction.
2. Varying CDD based on level of risk.
3. Change in the client circumstances.
4. An offer that’s too good to refuse.

Amendments to the Money Laundering Regulations 2017 part 1

The Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022 make amendments to the Money Laundering Regulations 2017 in the following areas.

• Incorporate the risk of proliferation financing into the Money Laundering Regulations 2017 including the requirement for a firmwide risk assessment. Proliferation financing refers to the illegal proliferation of weapons of mass destruction such a biological, chemical or nuclear weapons. The change is effective from 1 September 2022.
• Extend the requirement to check the PSC register to existing clients as part of ongoing monitoring and introduce a definition of material discrepancy. The changes which also apply to the trusts register and register of overseas entities apply from 1 April 2023.

Amendments to the Money Laundering Regulations 2017 part 2

Further amendments to the Money Laundering Regulation 2017 were made by the Money Laundering and Terrorist Financing (High-Risk Countries) (Amendment) (No. 2) Regulations 2022 which remove Malta from the list of high risk third countries and add Gibraltar. The changes became effective on 12^th July.

ICAEW publishes AML Supervision report for 2021-22

The ICAEW has published its annual report on AML supervision as required by the Money Laundering Regulations 2017.

The report provides an overview of how the ICAEW fulfils its supervisory role and includes key findings arising from its supervisory activities.