The UK’s Financial Reporting Council (FRC) has issued a revision of its UK auditing standard on the responsibilities of auditors relating to fraud.
The revisions to the standard are intended to provide increased clarity of the auditor’s obligations, following the issue raised by Donald Brydon in his review of the quality and effectiveness of audit.
The revisions include enhancements to the requirements for the identification and assessment of risk of material misstatement due to fraud and the procedures to respond to those risks.
The revised UK standard is effective for audits of periods beginning on or after 15 December 2021 with early adoption permitted.
FRC director of regulatory standards Mark Babington 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. However, sometimes the UK needs to show leadership, and move in advance of international standards to address urgent stakeholder concerns in the public interest – we believe that some of the misunderstandings that have been communicated around the auditor’s responsibilities in respect of fraud meet this test. In response, we have developed a revised standard which makes auditors’ obligations clearer, enhances the risk assessment they carry out, and sets clearer requirements for what the auditor then does.”
The revised standard is available to read in full here.
Earlier this week, a study by audit confirmation solution, Confirmation, a part of Thomson Reuters, found that the value of fines issued by the FRC rose by 180% to just under £25m ($35.4m) for the year-end 31 March 2021.