On 30 June 2010, the UK’s Financial Services Authority (FSA) and Financial Reporting Council (FRC) published a joint discussion paper (DP) entitled “Enhancing the auditor’s contribution to prudential regulation”.
The DP considers the FSA’s reliance on audit in relation to its objects of market confidence and financial stability, as well as in relation to client assets. It notes that auditing standards require auditors to exercise professional scepticism but asks whether auditors are sufficiently sceptical.
The DP also addresses how audit could be more effective for the FSA. It outlines proposals to:
- – revise the Auditing Practice Board’s auditing standards and practice notes
- – improve cooperation between the FSA and FRC
- – clarify how auditors fulfil their duty to report to the FSA
- – enhance auditors’ reporting on client assets
- – enhance FSA and FRC powers.
The DP proposes that the FSA should engage with auditors earlier and more often, particularly in relation to high impact firms, as well as with firms’ audit committees.
The DP sets out, in Annex 2, governance and reporting responsibilities of firms and their auditors.
A copy of the discussion paper can be downloaded by clicking here. Any comments should be submitted by 29 September 2010.