Audit Firm: Framework to Deal with Brexit

Yesterday the UK decided to leave EU. This is an interesting outcome and at least a positive thing it terms that it will provide us with the topic for discussion for the rest of the year. 

Okay, the business, including auditors, now in situation where actions have to be taken and decisions to be made. 

The scenarios and preliminary analysis of Brexit situation were issued by the    Big 4 firms recently. Please, follow links to find the reports available on the internet:

• Materials from EY
• Materials from PWC
• Materials from Deloitte
• Materials from KPMG

Based on these readings the companies influenced by Brexit will apply following framework:

After Referendum: 2016 -2018

• Deep analysis and development of the plan for full implementation of Brexit actions
• Communication of implications to customers, employees and other third parties
• Start partial/interim implementation of actions
• Political activity to lobby more positive post-brexit options 

Brexit implementation by UK Government: from 2018

• Full implementation of the plan previously designed

Audit Method: Accounting for BREXIT

Auditors should consider the implications of BREXIT? The  EU referendum is carried out today and tomorrow by 9:00 AM Greenwich time we should be able to know the preliminary results.

Lets think about fictional accounting standard "Brexit accounting". We, auditors, have clients who work both in UK and EU and would like to know impact of Brexit outcome. 

I would consider following topics in this standard:

• Accounting for uncertainties;
• Disclosure and recognition of contingent assets;
• Disclosure and recognition of contingent liabilities;
• Disclosure of business risks related with change of UK status in EU

Some questions

• do we need to calculate long term provisions for employment termination  for EU employees from outside UK;
• discontinued operations: is there risk for the business to do that in case Brexit legislation would be enacted
• disclosure of future development in the strategic reports of companies who would benefit from Brexit

Some articles on the topic

EY helps boards to prepare:

http://www.ey.com/Publication/vwLUAssets/ey-helping-boards-assess-and-prepare-for-the-uk-referendum-on-eu-membership/$FILE/ey-helping-boards-assess-and-prepare-for-the-uk-referendum-on-eu-membership.pdf

Careers:

http://www.careersinaudit.com/article/how-will-brexit-affect-auditors-/

PWC involvement:

http://news.sky.com/story/1640482/accounting-giant-pwc-kicks-off-brexit-debate

Tax matters:

http://www.accountancyage.com/2016/04/13/would-brexit-mean-the-end-of-vat-in-the-uk/

Boards readiness:

https://iia.org.uk/media-centre/news/ftse-250-boards-finding-possible-brexit-planning-challenging/