FRC publishes new Auditor Regulatory Sanctions Procedure and Guidance
News types: Codes and Standards Announcements, Inspection, Investigations, Operating Procedures, Publications
Published: 11 November 2013
The Financial Reporting Council (FRC) has published the Auditor Regulatory Sanctions Procedure and Guidance, previously consulted on earlier this year, which comes into effect today for all audit firms who are registered with the ICAEW and subject to independent monitoring by the FRC’s Audit Quality Review.
The new Auditor Regulatory Sanctions Procedure follows amendments to the Companies Act 2006 which require that Recognised Supervisory Bodies (RSB) enable the body performing independent monitoring function to determine sanctions. These sanctions can be brought against statutory auditors where they have not complied with the rules relevant to statutory audit. The new procedure is another important reinforcement to the independence of the FRC, as envisaged by the package of FRC reforms introduced in 2012. The procedure allows the FRC, through its Monitoring Committee or an Independent Sanctions Tribunal, to determine sanctions or suggested undertakings itself following an inspection, where appropriate, rather than referring the matter to the RSB to decide whether to take action.
FRC CEO Stephen Haddrill said:
‘The quality of audit in the UK is strong. However sometimes our inspections reveal shortcomings that we expect the firms to address. The new procedure enables the FRC to require such work to be done and if appropriate a penalty to be applied without reference to the professional bodies. This reinforces our independence and enhances the impact of our audit monitoring activity. Sanctioning poor quality work provides further encouragement for firms to conduct high quality audits and ultimately enhances trust in the audit profession. The new Guidance sets out a clear approach for Committees and Tribunals that ensures transparency and consistency in administering sanctions.’
Notes to editors:
- The FRC is responsible for promoting high quality corporate governance and reporting to foster investment. We set the UK Corporate Governance and Stewardship Codes as well as UK standards for accounting, auditing and actuarial work. We represent UK interests in international standard-setting. We also monitor and take action to promote the quality of corporate reporting and auditing. We operate independent disciplinary arrangements for accountants and actuaries; and oversee the regulatory activities of the accountancy and actuarial professional bodies.
- The Procedure is expected to come into effect for Registered Auditors who are members of ICAS and ICAI on 9 December, following approval of the amendments to the Audit Regulations.
- Auditor Regulatory Sanctions Procedure (PDF)
Responses to Auditor Regulatory Sanctions Procedure Consultation (PDF)
Auditor Regulatory Sanctions Procedure Feedback Statement (PDF)
Auditor Regulatory Sanctions Guidance (PDF)
Responses to Auditor Regulatory Sanctions Guidance Consultation (PDF)
Auditor Regulatory Sanctions Guidance Feedback Statement (PDF)