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Reporting Breaches of the FRC Ethical Standard for Auditors

Section 1.21 of the FRC’s Revised Ethical Standard 2019 introduced a requirement for Statutory Auditors in the UK to report, on a biannual basis, breaches of the standard to the Competent Authority and to those charged with governance of an entity relevant to an engagement in a timely manner.

What should be reported?

Under the requirements of the standard, ethical breaches should be reported, not general breaches. An example of an ethical breach that may arise in smaller audit firms would be an RI with a long period of association not putting safeguards in place, such as an EQCR.

When should firms report?

Biannual reporting is understood to be 6 months from 15 March 2020 and then six monthly thereafter. There is no requirement for firms to submit a nil return.

How should firms report?

Breaches relating to the public interest entities (PIEs) should be reported to the FRC. In other cases, reports should be made to the firm’s audit regulator.

Since the introduction of the standard on 15 March 2020, things were quiet in terms of announcements from the professional bodies, with guidance only being issued recently.

ICAEW Firms

The ICAEW have issued guidance on their website, along with a new form to report breaches, which can be found at the following link:

https://bit.ly/3jeJ0WY 

ACCA Firms

ACCA firms should compile a report detailing the following, to be emailed to PMDadmin@accaglobal.com:

  • Firm name and number
  • Name of clients and their year-end affected
  • Name of RIs
  • Full details of the breach with supporting documents, indicating section of FRC ES breaches
  • Any remedial actions taken by the firm
  • Any other useful information

Should you have any queries, please get in touch with a member of the HAT team, who will be happy to provide assistance.