FRC: Audit tendering helps improve audit confidence

08 February 2017

The FRC notes on best practice published yesterday highlight how audit committees can approach the process to get the best outcome and is based on experiences of audit tenders since the requirement was first introduced into the UK Corporate Governance Code in 2012.

Confidence in audit derives from independent audit committees appointing an auditor that is best able to deliver an independent, high quality audit. The selection process can be time consuming so the FRC recommends involving the whole of the audit committee, discussing with investors which audit firms will be invited to tender, and engaging with firms before the process starts to ensure the right teams are involved.
In order to draw up its best practice guidelines, the FRC held roundtables with the chairs of audit committees that had recently gone through an audit tender process or were about to do so, investors and senior audit engagement partners from the larger audit firms.
Areas where lessons have been learnt include:

• Timing of a tender– how this coincides with other factors such as Board changes and rotation and retendering requirements throughout the group.
• Which firms to invite to tender– identifying the need for industry and /or geographic knowledge, and understanding investors and regulators  views of individual firms
• Balancing professional services– how to manage conflicting requirements of different professional services and whether to prioritise audit.
• Engagement with investors– the timescales of announcing the audit tender process and other milestones in communicating with shareholders.
• Getting the right audit team– exploring the skills and experience needed from an audit engagement partner.
• Decision-making approaches– whether to give technical challenges, hold meetings with management and assessing the response to the request for proposal.

Full press release

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