Harris & Co Accountants in Northampton announce that the Financial Reporting Council (FRC) has published the Auditor Regulatory Sanctions Procedure and Guidance, previously consulted on earlier this year, which comes into effect today for all audit firms registered with the ICAEW and subject to independent monitoring by the FRC’s Audit Quality Review.
The new sanctions procedure follows amendments to the Companies Act 2006 which requires that Recognised Supervisory Bodies (RSB) - which includes professional institutes such as the ICAEW - enable the body performing independent monitoring function to determine sanctions.
These sanctions can be brought against statutory auditors where they have not complied with the rules relevant to statutory audit.
The new procedure is another important reinforcement to the independence of the FRC, as set out by the package of FRC reforms introduced in 2012.
The procedure allows the FRC, through its Monitoring Committee or an Independent Sanctions Tribunal, to determine sanctions or suggested undertakings itself following an inspection, where appropriate, rather than referring the matter to the RSB to decide whether to take action.
FRC CEO Stephen Haddrill said:
‘The quality of audit in the UK is strong. However sometimes our inspections reveal shortcomings that we expect the firms to address.’
‘The new procedure enables the FRC to require such work to be done and if appropriate a penalty to be applied without reference to the professional bodies. This reinforces our independence and enhances the impact of our audit monitoring activity.’
‘Sanctioning poor quality work provides further encouragement for firms to conduct high quality audits and ultimately enhances trust in the audit profession. The new guidance sets out a clear approach for committees and tribunals that ensures transparency and consistency in administering sanctions.’