FRC issues guidance on the audit of housing associations

News types: Consultation Announcement

Published: 30 January 2014

PN 008/14
The Financial Reporting Council (FRC) has issued guidance for auditors on the audit of housing associations in the light of the landscape in which the social housing sector now operates.
Reductions in grant funding, welfare reform and the impact on availability of funding following the financial crisis have led many Associations to diversify their activities and funding models. Some associations augment their traditional housing activities with more commercial activities such as student accommodation or care homes.  Some have moved away from long term bank financing to bond financing and an increased use of interest rate swaps. 

This new guidance enables auditors to respond to these business risks and to identify risks of material misstatement of Housing Associations financial statements.

Nick Land, FRC Board member and Chairman of the Audit and Assurance Council, said,

“Housing Associations provide some 3 million homes.  Changes in recent years have given rise to potential business and audit risks that auditors need to be aware of when undertaking audits in this economically important sector of the UK economy.

This new update is intended to assist auditors in understanding the nature of these risks in, among other things, the context of recent regulatory developments, pressures on public expenditure and changes in the ways in which some Housing Associations finance their activities”.

Guidance for auditors was previously issued in 2006 and withdrawn in 2012 pending this revision.  The updated guidance is given in Practice Note 14: The audit of housing associations in the United Kingdom (PDF)

Notes to editors:

  1. 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; aand oversee the regulatory activities of the accountancy and actuarial professional bodies.

  2. Practice Note 14 can be obtained here (PDF).  A Feedback Statement on the consultation on the guidance can be obtained here (PDF).

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