On Friday 29 January UKSA and ShareSoc responded to the FRC’s consultation on the proposed revisions to the UK audit standard on an auditor’s responsibilities relating to fraud. The full text of the consultation document can be found here and our response document can be found here.
The number of recent audit failures has focused standard setters and regulators on how to improve audit quality.
At present the main consumers of auditors’ work, shareholders in companies, are not happy. There is an expectations gap — shareholders expect auditors to have greater responsibilities relating to fraud than what audit regulations or standards require.
The main responsibilities relating to fraud rest with companies and their directors to try and prevent or reduce frauds that tend to cost shareholders in loss in value or complete failure of their companies. Auditors should try and make sure they carry out sufficient work to ensure that the probability of such a fraud and its resulting material impact on financial statements of a company is very remote.
The FRC’s proposed revisions to the standard on an auditor’s responsibilities relating to fraud make this clearer, which is why we support them.
However, we also believe there are other changes that could improve the audit standard and reduce the expectations gap and have provided these suggestions in our response.
