These proposals are designed to meet the requirements of the Statutory Audit Directive. In general, they would not apply where the audit firm is already subject to an equivalent system of regulation in its home country. The focus is on auditors from countries that the European Commission has not recognised as having an equivalent system of regulation, or as having firm plans to introduce one. There are 30 such audit firms from 21 countries undertaking just over 40 relevant audits.
The particular problem the POB faces is how to apply external monitoring to third country auditors in a way that meets the obligations under the Statutory Audit Directive, but is proportionate to the significance of a particular issuer for UK investors and has regard to the likely costs involved in monitoring the quality of the relevant audits and auditors around the world.
The POB sets out its analysis of the relevant issuers and audit firms in Section 2, and the proposals on which the POB would welcome views in Section 3. Section 4 gives a draft impact assessment and Section 5 sets out how to respond.
Paul George, Director of the POB said: “It is important that investors understand the degree of assurance offered by any audit inspection regime and do not place more weight on it than is justified by the assurance it delivers. It is certainly challenging to find a proportionate way of monitoring the quality of audit work at firms widely scattered across the world that only have one or two relevant clients and operate in countries that present obstacles to effective inspection, for example by blocking access to audit working papers.”
“Overall, we are doubtful that the regulatory work and costs required to apply the same inspection approach internationally as that applied in the UK would be justified by the benefits for investors, having regard to the value of the shares traded in London of the companies being audited. We have therefore proposed a range of options and would particularly welcome the views of investors on the different inspection approaches we have proposed and the value they would place on such monitoring of the relevant audit firms.”
Press release
© FRC
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article