Auditing standards are professional standards or requirements for the performance of an audit of financial statements. They include objectives for the auditor, together with requirements and related application and other explanatory material. Preparation of a uniform set of standards for auditing practice in UK was started back in March 1976 when the Auditing Practices Committee (APC) was established by the Consultative Committee of Accountancy Bodies (CCAB) to formalize the existing co-operation of the CCAB bodies on audit practices. At the time of its establishment the role of the Auditing Practices Committee was defined as:
“To
provide a framework of practice for the exercise of an auditor's individual
judgement, by proposing for the approval of the Councils of the governing
bodies statements of explanation and guidance on auditing, and definitive
statements of auditing standards.”
In 2004 the Financial
Reporting Council (FRC) took over responsibility for the setting of audit
standards through the Auditing Practices Board (APB) which became a subsidiary
board of the FRC. The FRC was also charged with monitoring and enforcing these
auditing standards. In the same year of 2004, the UK’s Auditing Practices Board
(APB) took the decision to base UK and Irish auditing standards on ISAs. One of
the reasons for this alignment was to benefit from future improvements to them.
New standards were issued
by the International Federation of Accountants (IFAC) through the IAASB and
were adopted in the UK in October 2009 as ISAs (UK), and apply to audits of
financial statements for periods ending on or after 15 December 2010. Where
necessary, the APB has augmented the international standards with a small
number of additions to address specific UK and Irish legal and regulatory requirements.
The FRC, in June 2016, stated that references to Standards (UK) have been amended
to Standards (UK).
The Financial Reporting
Council (FRC) is now the authorized body for setting auditing standards in the
UK in accordance with the Companies Act of 2006 and Statutory Instrument on
Statutory Auditors (Amendment of Companies Act 2006 and Delegation of Functions
etc.) Order 2012 (SI 2012/1741). The Companies Act of 2006 establishes
mandatory audit requirements (statutory audits) for all companies unless they
qualify for exemptions based primarily on size, nature of activity and company
type, or whether they are dormant.
To sum up the discussion, all
financial statement audits in UK must be conducted in accordance with
International Standards on Auditing (UK) issued by the FRC. The current International
Standards on Auditing (UK) are based on the International Standards on Auditing
(ISAs) of the same titles that have been issued by the International Auditing
and Assurance Standards Board, published by the International Federation of
Accountants, with some additions to account for UK Company law.
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