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FRC revises practice notes on financial sector audits

The Financial reporting Council (FRC) has issued a revision of Practice Note 19: The audit of banks and building societies in the United Kingdom. Such Practice Notes are aimed at helping practitioners to comply with the requirements of UK auditing standards, providing additional contextual material.

The Practice Note has been developed with input from an expert working group including representation from audit firms with bank audit expertise, the banking industry, and the banking regulators. It also addresses findings from the FRC’s audit inspection work covering bank audits.

The revisions to Practice Note 19 reflect: 

  • revisions to UK auditing standards (ISAs (UK)), in particular ISA (UK) 540 (Revised December 2018), Auditing Accounting Estimates and Related Disclosures, which is effective for audits of financial statements for periods beginning on or after 15 December 2019;
  • guidance relevant to the audit of estimates for expected credit losses. The FRC says auditors may find this guidance helpful for the audits of periods ending before 15 December 2019 even if they have not early adopted ISA (UK) 540 (Revised December 2018);
  • changes in relevant legislation and regulation (at the time of publication, certain EU regulations, including binding technical standards, apply directly to UK banks and building societies. References to these are made in this revised Note. When the UK ceases to be a member of the EU these references will be updated accordingly); and
  • the establishment of the Prudential Regulatory Authority (PRA) and Financial Conduct Authority (FCA) in place of the Financial Services Authority (FSA).

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