Newswire August 2024

AUDIT & ACCOUNTING

FRC welcomes government legislation to modernise regulatory toolkit 

The FRC has stated that it welcomes the Government’s announcement of draft legislation to modernise its regulatory toolkit adding: 

“The FRC has transformed in recent years into a more robust and effective regulator. But despite this progress, there are serious gaps in the regulatory toolkit that have long been identified as being in need of reform so we can act fully in the public interest and support growth and the ability of companies to attract the capital they need. Without these changes we are the regulatory equivalent of being a sheriff for only half the county and with weaker powers than are needed. 

This positive direction of travel recognises our important role in supporting the UK’s reputation for good corporate governance, financial reporting, and audit. Our work underpins domestic and international investor confidence, resulting in businesses being more readily able to access the capital they need to grow and create jobs and wealth in every community across the UK. 

We will work with the Department of Business and Trade as it brings forward this draft legislation while continuing to use our existing powers to deliver good standards of corporate governance, financial reporting and audit and fulfilling our remit to support growth across the UK.” 

FRC publishes annual Tier 1 audit firm inspection results 

The FRC has published its Annual Review of Audit Quality which covers the inspection and supervision results of the Tier 1 audit firms, BDO, Deloitte, EY, Forvis Mazars, KPMG, and PwC, which the FRC defines as the firms with the largest share of the UK PIE market. The FRC has commented that results are based on a risk-based sample of the audits undertaken by firms, and are set out in more detail in each firm's report which are also published. 

FRC publishes Annual Report and Accounts for 2023/24 

The FRC has published its Annual Report and Accounts for 2023/24. The FRC has commented that the report underscores the FRC’s ongoing commitment to improving audit quality and corporate reporting in the UK while adapting to evolving market needs and protecting stakeholders in the public interest. 

FRC publishes latest Annual Enforcement Review 

The FRC has published its sixth Annual Enforcement Review which provides a summary of FRC enforcement activity for the year ending 31 March 2024. The Review analyses high-profile cases concluded in the last year and also draws out important themes and lessons from recently concluded cases. These include failures in relation to fundamental aspects of an audit such as auditor objectivity and integrity, understanding the entity, audit planning and evidence, professional scepticism, and the approach to the risk of fraud. 

FRC launches market study on NHS audit market 

The FRC has announced the launch of a comprehensive market study into the audit market for NHS providers and Integrated Care Boards (ICBs). This initiative is in response to growing concerns about difficulties NHS bodies are facing appointing and retaining auditors. 

Key areas the FRC's market study will explore include: 

• supply of auditors, including barriers to entry and expansion for audit firms; 

• demand for audit, including the audit tendering process and engagement by NHS bodies; 

• the regulatory framework, including unique features of NHS provider and ICB audits; and 

• capacity constraints and potential impacts on the wider local audit market. 

UKEB adopts Lack of Exchangeability: Amendments to IAS 21 

The UKEB has adopted amendments to IAS 21 ‘The Effects of Changes in Foreign Exchange Rates’. 

The UKEB has commented that they actively influenced the development of these amendments and the amendments are not likely to lead to a significant change in accounting practice. 

The amendments address the gap in IAS 21 that specifies the exchange rate to use in reporting foreign currency transactions when exchangeability between two currencies is temporarily lacking but does not specify what an entity is required to do when a lack of exchangeability is not temporary. 

The amendments aim to improve the usefulness of the information by: 

• defining what it means for a currency to be “exchangeable”; 

• providing guidance on determining the exchange rate when a currency is not exchangeable; and 

• specifying the disclosures to provide in those circumstances. 

The amendments were originally published on 15 August 2023 and are effective for annual reporting periods beginning on or after 1 January 2025, with early application permitted. 

UKEB outreach on the IASB’s IFRS 18 Presentation and Disclosure in Financial Statements 

Following the IASB’s publication of IFRS 18 Presentation and Disclosure in Financial Statements effective for reporting periods beginning on or after 1 January 2027, the UKEB is now seeking UK stakeholder views on the IASB’s standard. Stakeholder comments are welcome until 6 September 2024. 

IAASB issues ISA for LCE Auditor Reporting Supplemental Guidance 

The IAASB issues ISA for LCE Auditor Reporting Supplemental Guidance which is intended to be read in conjunction with the International Standard on Auditing for Audits of Financial Statements of Less Complex Entities (ISA for LCE). 

This supplemental guidance provides assistance for auditors about modifications to the auditor’s report when using the ISA for LCE. It also includes information on using emphasis of matter and other matter paragraphs, reporting on other information, and reporting on a material uncertainty related to going concern. Additionally, the guidance features eight illustrative auditor’s reports, including examples of adverse opinions, disclaimer of opinion, and opinions when there is a material uncertainty related to going concern. 

The IAASB emphasise that the publication does not amend or override the ISA for LCE, the text of which alone are authoritative. Reading the publication is not a substitute for reading the ISAs. 

Currently, the FRC have no plans to implement the ISA for LCE in the UK. 

ICAEW and ICAS supports new body to build trust in PIE audits 

The ICAEW have announced that, together with the ICAS, they have joined firms offering audits of Public Interest Entities (PIEs) to create a new independent organisation to shape best practice and drive improvements in audit quality. 

The Centre for Public Interest Audit (CPIA) aims to bring together leaders from across the profession as a single, standalone voice to support reform, shape best practice in UK public interest entity audit and challenge the status quo. 

ACADEMIES 

Academy trust handbook 2024 

The Education and Skills Funding Agency has published the Academy trust handbook 2024 which is effective from 1 September 2024. The handbook outlines that, from 1 September 2024, Academies will be able to enter into finance leases for assets used day-to-day. In addition, the Education and Skills Funding Agency highlights that there will be a move towards a position where the use of a professional internal audit function becomes the norm for those Academies who receive higher levels of funding. 

ICAEW 

ICAEW Practice Assurance Monitoring Report 2024 

The ICAEW has published its Practice Assurance Monitoring Report 2024, which summarises the results of more than 1,300 practice assurance reviews it carried out in 2023. The main area of focus during these reviews was anti-money laundering (AML) procedures. 

For details on a selection of the key findings, and look ahead to ICAEW’s areas of focus for 2024, you can read our blog here. 

MONEY LAUNDERING 

AASG Risk Outlook updated July 2024 

The Accountancy AML Supervisors Group (AASG) has updated the Risk Outlook which sets out the key AML risks within the accountancy sector. Updates include the addition of risks and red flags around proliferation financing and crypto-assets, as well as further details on the risk of trust and company services. 

New MLRO Guidebook from ICAEW 

The ICAEW has published a comprehensive guide for new and existing money laundering reporting officers (MLROs), nominated officers and AML compliance officers. 

TAXATION

VAT on school fees to go ahead

The Government has announced the removal of the current VAT exemption for private schools  (including board and lodging fees). To read more, please click here.

And FHL changes

The abolishment of the furnished holiday lettings (FHL) tax regime will take place from April 2025. To read more, please click here.

And non-doms

Changes are being made to the taxation of non-UK domiciled individuals from April 2025. To read more, please click here.

HMRC launches VAT Registration Estimator

HMRC has launched a digital tool to help businesses estimate what registering for VAT may mean for them. To read more, please click here.

HMRC has produced information for use by stakeholders to communicate with pensioners about simple assessments.

The guidance covers what simple assessments are, why HMRC uses them and what pensioners need to do on receipt of a simple assessment. To read more, please click here.