Audit FAQs

Implementation actions are underway as required by the EU Audit Directive of the FRC as the competent authority and in respect of AQR, and planning for when the FRC also undertakes inspections of local public audits on a statutory basis.

The AQR budget and work-plan process is further complicated by a rebalancing of the wider FRC costs to the audit profession and the FRC operating an April to March financial and operating year.

The levy for 2017 will be based on the FRC’s analysis of public interest audits, information supplied by the audit firm and an AQR budget estimate for 2016/17.

What does this mean for each firm?

• For firms on an annual visit cycle with resulting FRC public reporting of results – the levy will be calculated as a base (annual visit group) amount plus an allocation based on audit fees.
• For firms on a multi-year visit cycle only – the levy will be based on an audit volume basis using bands to calculate the amount payable.

The two elements above fund the operation of the AQR 2017/18.

To withdraw your firm’s audit registration you need to complete our form.

• Find out more about how to withdraw.

If you have an employee who is a responsible individual, they are billed as a principals.

If you have any trading name(s) that are used to sign audit reports, they are billed as additional branch office(s).

Trading names are treated as additional offices. Even if the address from which you trade is the same as that of the main firm. For billing purposes, an office is any separate location of the firm mentioned on its letterhead.

For billing purposes, we disregard offices that are used only for meetings, at which no staff are located and no records are maintained (ie, ‘market-day’ offices). Trading names will also be disregarded if a trading name is not used to sign off audit reports or to indicate it’s a registered auditor.

Please advise the Regulatory Support team by email to regulatorysupport@icaew.com, the FRC or IAASA (as appropriate) if your new client is a ‘public interest entity’ or an FRC retained audit. Such entities are:

• Companies whose transferable securities (equity or debt) are admitted to trading on a regulated market
• Credit institutions (for example banks or building societies but not credit unions)
• Insurance undertakings
• Other audits ‘retained’ by the FRC (UK AIM or NEX-quoted companies, but not those that are SME entities, and Lloyd’s syndicates).

If your new client does not fall within these categories, you do not need to inform anyone. However, we will ask you to provide an up-to-date analysis of your audit clients every year on your annual return.

The requirements are set out in Audit Regulation 3.15.

Please advise the FRC or IAASA (as appropriate) if the client is a ‘public interest entity’ or an FRC retained audit. Such entities are:

• Companies whose transferable securities (equity or debt) are admitted to trading on a regulated market.
• Credit institutions (for example banks or building societies but not credit unions).
• Insurance undertakings.
• Other audits ‘retained’ by the FRC (UK AIM or NEX-quoted companies, but not those that are SME entities, and Lloyd’s syndicates).

If your client does not fall within these categories, and you have resigned as auditor before the end of the normal period of office, you should inform us by email to auditorchange@icaew.com (or inform IAASA if an Irish client).

The requirements are set out in Audit Regulation 3.08.

The FRC’s budget for 2016/17 is proposed at the same level as agreed for 2015/16. However, within that overall level, the FRC proposes to seek increased resources from the audit profession to fund additional work arising from the new EU audit legislation.

The FRC’s budget for core operating costs will increase by 6% to enable it to deliver its priorities and support the Department for Business, Innovation and Skills in preparing for the implementation of the new EU Audit Directive and Regulation. The amount raised through the preparers levy will increase by 6.1%. In response to stakeholder feedback on the Draft Plan & Budget the increase in the minimum levy will be limited 3.2%. The levy payable by larger organisations will vary according to their market capitalisation (or, where applicable, turnover). The contribution from the accountancy professional bodies will increase by 2.5%.

The budget for audit quality reviews will increase by 12.5% in response to the Competition and Market Authority requirements.