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Audit underpins public confidence in corporate governance and reporting by UK companies. Since the financial crisis, the FRC has introduced measures to enhance confidence in the quality of audit and increase the value of auditor reporting to investors. The measures include retendering, enhanced and extended auditor and audit committee reporting, and increased transparency of the results of the FRC’s audit quality inspections.
In April 2014, the FRC announced that to enhance confidence in the quality of audit, its work would include a focus on recommendations from the then Competition Commission’s review of competition in the FTSE 350 audit market; the implementation of the new EU Regulation and Directive on statutory audit (ARD); developing best practice guidance for audit committees; and assessing whether ethical standards for audit remain fit for purpose.
The FRC is now consulting on proposals in connection with those elements which it considers should be introduced at the same time as the ARD is implemented into the UK. In developing its proposals, the FRC has sought to follow underlying principles and objectives:
The FRC’s proposals reflect responses received to its earlier consultation Auditing and ethical standards implementation of the EU Audit Directive and Regulation, and include an impact assessment of the costs and benefits arising from decisions taken by the FRC.
Stephen Haddrill, FRC Chief Executive said,
“The Audit Regulation and Directive is large and complex. We are working closely with professional bodies to make sure the new regulatory regime works as effectively as possible. We must ensure that it builds on the progress made in the UK in recent years in terms of the quality of audit, that competition in the audit market is strengthened in a way that supports innovation and that the regulatory regime that emerges provides confidence to investors and to firms by being fair, understandable and independent.”