FRC announces 2019/20 audit thematic reviews, priority sectors and audit areas of focus

November 15, 2018

Published: The Financial Reporting Council (FRC)

The Financial Reporting Council (FRC) will, in 2019/20, supplement its routine AQR monitoring programme with two thematic reviews. These thematic reviews, which focus on aspects of audit practice across a number of firms to identify both scope for improvement and good practice, complement other AQR work, all with the over-riding objective of driving improvements in audit quality.

The thematic review topics are:

– Audit Quality Indicators (AQIs): An assessment of the development and use of AQIs by UK audit firms. This review commenced during our 2018/19 inspection programme and will be delivered in 2019/

 – The use of technology in audits. We reported on firms’ use of data analytics in January 2017. We will revisit the progress that the firms have made since, how the use of technology has widened beyond data analytics and the potential impact upon audit quality

The FRC will publish its 2018/19 thematic review of “The Auditors Work on Other Information in the Annual Report” later in 2018, followed by a report on Audit Firm Transparency Reporting in the first quarter of 2019.

Priority Sectors

Priority sectors are those considered by the FRC to be particularly high risk in terms of corporate reporting and audit by virtue of particular economic or other pressures. The corporate reports and audits selected for review by the FRC in 2019/20 will have regard to the following priority sectors [1]:

– Financial Services, with emphasis on banks, other lenders and insurers

– Oil and Gas (CRR only)

– General Retailers; and Retail Property

– Business Support Services

– Construction and Materials

 

Areas of Focus
Audit areas of focus are specific aspects of audit work or non-sector specific factors which we expect to consider when reviewing an audit.

As part of our audit monitoring programme for 2019/20 we expect to pay particular attention to the auditor’s work on:

– Going concern and the viability statement

– The Other Information in the Annual Report

– Long-term contracts

– The impairment of non-financial assets

We will also consider the potential impact of Brexit, in both the selection of audits to review, and the individual areas of audit work to focus on.

[1] The corporate reports and audits selected for review include but not are limited to entities in the priority sectors.

https://www.frc.org.uk/news/november-2018/frc-announces-2019-20-audit-thematic-reviews,-prio

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