Everything you need to know about updates to the UK Audit Regulations effective from 1 October 2024 as well as a roadmap of further changes coming in 2025.
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.
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.
Other regulation changes introduced on 1 October
During the last 12 months there have been other regulatory developments which needed to be reflected in the Audit Regulations. As these changes related to legislative and regulatory developments it was appropriate for them to be implemented as soon as possible. They have therefore been 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.
- 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- Updating the Audit Regulations to refer to a firm’s obligations under ISQM1 and thereby removing all superseded references to ISQC1; and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
View a Schedule of Amendments to see the exact changes that have been made
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
Latest consultation: notification of the movement of audits
ICAEW proposed 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. The consultation is now closed and we are reviewing the responses we received before deciding on the next steps.
ICAEW roadmap of changes
Changes finalised and incorporated into 1 October 2024 amendments
| Area |
What are we |
Why are we making the change? |
When is this happening? (subject to approval by ICAS and CAI) |
| CPD | The audit regulations have been amended to emphasise the need for relevant documented CPD by individuals and firms following ICAEW’s new CPD Regulations. This includes more broadly expressed regulations 3.17 and 3.17A and specific reference to restrictions in the guidance under regulations 7.01 and 7.16. |
The changes follow our autumn 2023 consultation. |
Changes came into effect on 1 October 2024. |
| Audit-firm eligibility |
New definition of ‘majority’ for the purposes of decisions made under audit regulations 2.03b and 2.03c. Updated definition of ‘voting rights’. Clarifying the guidance under audit regulations 2.03b and 2.03c. |
To align the audit regulations with the FRC Eligibility Criteria. To remove any tension between the audit regulations and the requirements of the Companies Act 2006. |
The regulations came into effect on 1 October 2024, and firms have until 1 April 2025 to regularise any resulting eligibility issues. |
| Recognition of overseas audit qualifications |
New definition of ‘adaptation period’. New definition of ‘Professional Qualifications Act’. Updated definition of ‘audit qualification’. Updated guidance in Chapter 4 on the process to apply for responsible individual (RI) status. |
To reflect provisions included in the Professional Qualifications Act 2022 for the steps professional bodies have to take to recognise third country qualifications where there was agreement between the UK and the relevant third country – including when an adaptation period is required in addition to an aptitude test. |
Changes came into effect on 1 October 2024. |
| Monitoring compliance with the audit regulations |
Updated guidance to 3.18, 3.19 and 3.20 around competence and compliance and the conduct of audit. Guidance Chapter 2 has been deleted as most of the content is contained within the standard. |
To align the audit regulations with ISQM1 and remove superseded references to ISQC1. |
Changes came into effect on 1 October 2024. |
| Committee definitions |
Definitions and cross-references to the conduct and enforcement committees and tribunals of the three Institutes have been amended. New definition of ‘disciplinary bodies’ added to simplify references to the various committee structures within the three Institutes that share the audit regulations. |
To take account of differing structures between ICAEW, CAI and ICAS as these are joint regulations. |
Changes came into effect on 1 October 2024. |
Changes finalised and awaiting approval
| Area |
What are we |
Why are we making the change? |
When is this (subject to approval by the ICAEW Regulatory Board, ICAS and CAI) |
| Compulsory alternates for sole practitioners |
New standalone regulation to be added to require sole practitioners to appoint an alternate. Guidance to be expanded to explain who can be the alternate. |
The changes follow our autumn 2023 consultation. Having reflected on the feedback to the consultation, we have widened the eligible persons who can become an alternate to include any Chartered Accountant. |
Summer 2025, with a transitional period of six-months following the changes to the regulations becoming effective. |
| Introduction of the ARC’s new sanctioning power over RIs |
New power to be given to ICAEW’s ARC to issue non-financial sanctions against an RI for breaches of the audit regulations. |
The changes follow our autumn 2023 consultation. Having reflected on the feedback to the consultation, we will not be giving ICAEW’s ARC power to issue financial penalties against RIs. However, we will keep this under review, and it may be subject to another consultation in future. |
Summer 2025 |
Changes currently being considered
| Area |
What are we proposing to change? |
Why are we proposing the change? |
When would the change happen? (subject to approval by the ICAEW Regulatory Board, ICAS and CAI) |
| Notification of movement of audit engagements |
We are proposing a change to the audit regulations to require audit registered firms to notify ICAEW when they are appointed as auditors to certain entities. |
The aim is to increase the transparency of the movement of these audits between audit firms. | Summer 2025, pending an ICAEW Regulatory Board review of our recommendation for next steps. |
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.
Upcoming changes that may affect eligibility
Firms will have until 1 April 2025 to comply with these changes which are effective from 1 October
Find out moreAudit Regulations effective 1 October