Newswire May 2021

FRC sanctions against auditors

The FRC has recently issued two decision notices setting out sanctions imposed on two audit firms and partners. The notices here and here describe a number of deficiencies in audit work and although they relate to listed companies, many of the issues are those that could come up one smaller audits too.

Rating (coronavirus) and directors’ disqualification (dissolved companies) bill

This new bill was announced in the Queen’s speech and will mean that authorities have greater powers to investigate directors of dissolved companies, hopefully offering some protection to investors.

New Charities Bill

Also announced in the Queen’s speech was a new Charities Bill which would make various changes in England and Wales relating to how trustees interact with their charities and would also ease the process for charities to amend their governing documents. A separate Dormant Assets Bill hopes to unlock around an additional £880 million for social and environmental initiatives across the UK.

ICAEW proposals on professional indemnity insurance

ICAEW are consulting on making a change to the minimum approved wording in insurance policies relating to PI claims. The changes would mean that firms’ standard insurance policies had a narrower scope and that firms choosing to cover anything “cyber related” would need to buy a separate cyber policy.

Revised assurance standard

The FRC has published a revised version of ISRE(UK) 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity.” Effective for accounting periods commencing on or after 15 December 2021, the revised standard clarifies the responsibilities of the auditor and strengthens the review procedures required on management’s going concern assessment.

 FRC thematic reviews

A new thematic briefing on the audit of cash flow statements published by the FRC highlights the need for further improvement in the procedures adopted by firms to ensure that cash flow statements are free from material misstatement.

The FRC has also issued a review of interim reports to raise companies' awareness of issues that might arise in the 2021 interim reporting season. The review covered interim reports from June to September 2020 and concluded in general the quality was good, which is impressive given that these will have been among the first formal financial reporting prepared in Covid times.

Amendments to FRS101

The FRC has completed its 2020/21 cycle of amendments to FRS101, with only limited changes being made to ensure consistency with IAS1 “Presentation of Financial Statements” and to provide an additional disclosure exemption in relation to IAS16 “Property, Plant and Equipment”.

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