ACCA, the world’s leading global accountancy body, has said it is broadly supportive of the UK’s update to ethical standards (ES) for auditors to align with international best practice. However, it notes the need for clarification and additional guidance.
The accountancy body said that the Financial Reporting Council’s (FRC’s) revised and updated ethical standards reflect the significant developments in the International Ethics Standards Board Accountants (IESBA) Code since FRC’s last revision in 2019.
ACCA suggested an impact assessment to assess which entities will be excluded as a result of the removal of the OEPI (other entities of public interest) category and to determine the significance of this categorisation change. The body said it considers that the removal of the OEPI classification would simplify the ethical requirements for auditors, improve compliance and reduce uncertainty around the application of the ethical requirements.
ACCA also said it agrees with the enhanced prohibition where an audit firm’s independence could be threatened by an economic over reliance on fees from specific connected entities.
Mike Suffield, director, policy and insights, said: “Economic over reliance could impair objectivity and independence giving rise to self-interest and intimidation threats. This prohibition will be a step forward in renewing public confidence in the quality of audits.”
If implemented, the extension of restrictions on the provision of non-audit or additional services will align the FRC’s standard more closely with international standards.
ACCA continues to support FRC’s effort to simplify the standard but also called on the FRC to ensure it updates the standard as often as necessary to keep up to date with IESBA changes, and additional guidance outside of the ES is provided to facilitate consistent application.
Jessica Bingham, ACCA’s regional policy and insights lead for UK and EEMA, said: “We recommend that the FRC continues to conduct regular reviews of any breach reporting trends to ensure the identification of areas where further guidance could be provided.”