Changes to UK audit rules from 1 October 2024

A number of amendments to different sections of the UK Audit Regulations are currently in progress, with some approved changes now seeing an introduction date and other proposed changes at the consultation stage. We are staggering these updates to give our firms time to adapt and to ensure compliance. The first amendments regarding continuing professional development (CPD) will come into effect on 1 October 2024, alongside other legislative changes. More changes will follow next year.

There is also currently an open consultation inviting feedback on a proposal that will require audit registered firms to notify ICAEW when they are appointed as auditors to certain entities. We set out an estimated timeline for all of the amendments, including the details of the first tranche of confirmed changes.

Changes effective 1 October

During 2023 we consulted on proposed changes to clarify that registered auditors must ensure that they and their staff comply with their professional body’s CPD regulations. Respondents were broadly in support of these amendments, and they are therefore coming into effect on 1 October 2024.

• Find out more about the consultation feedback we received on this proposal

The new regulations and a Schedule of Amendments will be published here shortly.

Other regulation changes due to be introduced on 1 October

During the last 12 months there have been other regulatory developments which now need to be reflected in the Audit Regulations. As these changes relate to legislative and regulatory developments it is appropriate for them to be implemented as soon as possible. They will therefore be included in the first tranche of planned changes to the Audit Regulations:

• Changes to the eligibility criteria to make it absolutely clear that where a firm’s constitution, however comprised, includes certain decisions that need more than a simple majority-vote for approval, that audit-qualified persons must be able to control any such ‘super-majorities’. These changes are complex and therefore more information on these eligibility-related changes has been published separately. Firms will have until 1 April 2025 to comply. 
  
  • Find out more about changes to the eligibility criteria
• Changes to the eligibility criteria to allow audit qualifications of certain overseas individuals to now be recognised in the UK. This follows recent agreements the FRC has signed with counterparts in Australia, New Zealand and Switzerland;
• Updating the Audit Regulations to refer to a firm’s obligations under ISQM1 and thereby removing all superseded references to ISQC1; and
• Changes to committee definitions and cross-references to the conduct and enforcement committees and tribunals of ICAEW, ICAS and CAI have been amended 

Changes planned for 2025

When the changes relating to CPD were proposed, we also consulted on two other amendments:

• Extending the powers of ICAEW’s Audit Registration Committee (ARC) to enable it to issue regulatory penalties and impose restrictions on RIs as well as firms. Feedback on this proposal was mixed, with a range of concerns raised in relation to the exercise of these powers. Therefore, we will not be giving the ARC power to issue financial penalties against RIs at this stage. We will keep this under review and it may be subject to another consultation in future. The ARC will, however, be able to impose a requirement for additional, relevant CPD.
• The introduction of compulsory alternates for sole practices. Although 72% of respondents agreed that it should be compulsory for sole practice auditors to appoint an alternate, concerns were raised by respondents regarding the ability of a sole practitioner auditor to find an RI who would be willing to act as an alternate. The class of individuals who could fulfil the role of alternate will therefore be widened to include any RI or chartered accountant.

In light of the detailed feedback we received on these two areas, some of the proposed changes will be amended and included in a second tranche planned for early 2025. This will allow time for accompanying guidance and support material to be produced to address the issues raised during the consultation.

• Find out more about the final changes being taken forward regarding sanctioning RIs
• Find out more about the final changes being taken forward regarding compulsory alternates

Current live consultation: notification of the movement of audits

ICAEW proposes to make changes to the UK Audit Regulations and Guidance which will require audit registered firms to notify ICAEW when they are appointed as auditors to certain entities. Notification would also be required where audit fees are significantly higher than fees in the firm’s existing portfolio. The aim is to increase the transparency of the movement of these audits between audit firms. We are currently seeking feedback on the potential impact of these proposals.

• Find out more and respond by 6 September

ICAEW roadmap of upcoming changes

Changes finalised and approved by the ICAEW Regulatory Board

Changes finalised and awaiting approval

Changes currently being considered

Governance arrangements

As the UK Audit Regulations are held jointly with ICAS and CAI, all three boards need to approve any amendments before they are published.