Representing our members: BEIS CMA | FRC | Internal audit

ICAEW’s Audit and Assurance Faculty has contributed to a number of important consultations over the course of September and October 2019. We outline these representations below:

BEIS Competition and Markets Authority

On 13 September ICAEW responded to the initial consultation by BEIS on the recommendations made by the CMA following its Market Study on Statutory Audit Services. ICAEW notes that there is consensus that increased choice is necessary and desirable and to achieve this a basket of measures is required including:

  • changing how the Big Four operate;
  • reducing barriers to entry of challengers; and
  • supporting audit customers in exercising their extended freedom of choice.

Read our response to BEIS here.

2016 Auditing and Ethical Standards

On 27 September ICAEW responded to the FRC post-implementation consultation on the 2016 Auditing and Ethical Standards. In it we assert that:

  • it would be most appropriate to make changes to the Ethical Standards when indications are clearer as to the key outputs from the Brydon and BEIS reviews;
  • the short time frame for implementation will inevitably result in rushed planning and application by audit firms;
  • the cost to business, at a time of uncertainty in the British economy, has not been considered;
  • a fuller debate is required on what entities would fall in and out of the definition of PIE and the potential expansion to some other entities of public interest;
  • provisions that adjusted the prohibitions from SME listed entities were useful to ensure proportionate regulation and should not be removed; and
  • a number of additional prohibitions are applied to all audits, but it is unclear that there is a public concern about audits of SMEs.

Read our response to the FRC here.

 Internal audit code of practice

On 11 October ICAEW responded to the Chartered Institute of Internal Auditors consultation on the draft Internal audit code of practice. In it we state that:

  • an Internal Audit Code of Practice is desirable to help organisations determine the internal audit function they ought to have;
  • the new voluntary Code should be promoted as corporate governance best practice;
  • objectivity of internal audit should not be compromised if reporting lines or blurring of responsibilities occur between lines of defence;
  • these risks should be managed by the board through the audit committee; and
  • there should also be commitment to monitoring how the new Code works.

Read our response to CIIA here.

Three lines of defence review

On 19 September ICAEW responded to the Global Institute of Internal Auditors consultation on the three lines of defence, which we considered to be an important and valuable initiative in helping to strengthen and improve corporate governance. We are of the view that:

  • the model remains fit for purpose, but that the application of the model should be principles-based, to deliver a proportionate and cost effective approach to risk management; and
  • it is also critical that there is clarity about who performs the three lines of defence activities.

Read our response to GIIA here.