July 9, 2020
The Financial Reporting Council (FRC) has today issued a revision of its standard for the identification and assessment of risks of material misstatement in an audit of financial statements. The revised standard (ISA (UK) 315 (Revised – July 2020) – Identifying and Assessing the Risks of Material Misstatement) adopts the revisions made to the underlying international standard issued by the International Auditing and Assurance Board (IAASB).
The revisions to the standard are designed to drive a more robust and consistent risk identification and assessment, enhancing the basis upon which auditors design and perform audit procedures that are responsive to the risks of material misstatement and, thereby, obtain sufficient appropriate audit evidence to provide a basis for the audit opinion.
The FRC has published a Feedback Statement on its consultation on the revision of the standard and an impact assessment.
The FRC has also today issued International Standard on Assurance Engagements (ISAE) (UK) 3000, Assurance Engagements Other Than Audits or Reviews of Historical Financial Information. The standard adopts the corresponding ISAE issued by the IAASB but has been modified to require that assurance practitioners applying it for engagements that the FRC has designated as “public interest assurance engagements” comply with the FRC’s Ethical Standard. These will be assurance engagements where an audit level of independence is appropriate and expected by stakeholders. For other assurance engagements, practitioners have to comply with the relevant independence and other ethical provisions of their professional body and the Code of Ethics issued by the International Ethics Standards Board for Accountants (IESBA) specific to such types of other assurance engagement.
The FRC has not, at this time, designated any such “public interest assurance engagements”. However, it is appropriate to adopt the standard now to provide for a timely response should the FRC be requested to regulate the conduct of particular public interest assurance engagements in response to the outcome of recent and future reviews of the scope of auditors’ responsibilities and other developments. Voluntary application to other assurance engagements is permitted (the international version of the standard is already applied voluntarily by firms in the UK).
The FRC has published a Feedback Statement on its consultation on the adoption of the standard and an impact assessment.
Mark Babington, Acting Executive Director, Regulatory Standards, said:
“The UK supports the development and adoption of high quality global standards for corporate reporting and audit, enabling the UK to attract high quality global investment. The revision of ISA (UK) 315 represents an improvement to the current standard and addresses concerns expressed by regulators and other stakeholders. This standard is designed to meet the challenges of an evolving business environment and the needs of users and protect the public interest.
The UK adoption of ISAE 3000 provides an appropriate principles based standard for the conduct of public interest assurance engagements that are not covered by other specific assurance standards issued by the FRC.”