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It's happening....An Audit Reform
10 July 2020
It’s recently been announced by the Financial Reporting Council (FRC) that there would be new measures implemented – including the operational separation of the ‘Big 4’ UK Audit practices. This aims to restore confidence in a sector which has been in the spotlight over the past few years for multiple cases of misconduct.
The FRC released its latest business case paper, focusing on the following 2 objectives:
1: Improve audit quality by ensuring that people in the audit practice are focused above all on delivery of high-quality audits in the public interest.
2: Improve audit market resilience by ensuring that no material, structural cross subsidy persists between the audit practice and the rest of the firm.
The new proposal laid out aims to ensure the Audit world remains reputable and transparent, with 22 principles in which will need to be adhered to by the Big 4. Implementation plans should be readily available by October 2020, and should be in place by June 2024.
What does this mean?
Whilst this is a step in the right direction, these changes will not necessarily drive improvements in audit quality in many of the big firms, and is not the industry reform many were anticipating. We are still awaiting more details on the new regulator, Audit, Reporting and Governance Authority (ARGA), and what plans they have to restore public confidence in the audit industry and ensure that audit remains an attractive and reputable profession. If it’s such an important move, in assuring complete audit independence, it comes into question as to why this has been directed only at the top 4 audit firms, and only coming into effect by 2024?
At Fortus we took the decision 5 years ago to have a dedicated Audit & Assurance business, working independently from the other parts of the firm – that was long before this latest decision from the regulators. Why did we make that decision? Because, we thought it was the right thing to do for our clients to ensure they had peace of mind where we would always provide a high quality and robust audit service.