Who is responsible for an organisation’s non compliance with laws and regulations? We have replied to the FRC’s consultation to point out that the revised ISA (UK) 250 needs to be very clear on this – it’s the organisation’s management, not the auditor
The FRC is proposing to revise ISA (UK) 250 A and B, which set out the auditor’s responsibility to consider laws and regulations in an audit of financial statements, to make them more outcomes and principles based than rules based.
We have responded to the FRC’s consultation to point out:
- An entity or preparer, its management and those charged with its governance are primarily responsible for identifying those laws and regulations with which non-compliance may have a material effect on the financial statements
- It is not an auditor’s responsibility to identify those laws and regulations with which non-compliance may have a material effect on the financial statements. Their responsibility is to assess an entity’s ability to have identified these laws and regulations and report to shareholders accordingly, and
- our disappointment with the government recently shelving audit and governance reform proposals on audit and assurance policies. Actively engaged individual investors provide an additional challenge to an entity, its management and those charged with its governance and are used as such by enlightened directors and management. This is also proving to be the case with auditors. Audit standards should prompt auditor engagement with investors.
