Legal Professional Privilege cannot be defeated by the FRC’s interpretation of its disclosure regime
The world must go on, but how? Vast swathes of the work force (those who can) are working from home. Technology is stepping in to assist with the change in working patterns, but it is not infallible. There is huge pressure on parents, often trying to do two full time jobs whilst looking after small children. With schools closed, there is also the pressure to home-educate children, whilst trying to insulate them from the stress and fear that many adults are experiencing.
Audit firms carrying out statutory audits, with strict timescales, are one of the types of businesses which will feel the effects of this pandemic quite strongly. There are huge restrictions on travel, with the inevitable consequence that client sites are simply inaccessible. There is also the human factor of a workforce which may be reduced in productivity, on both the client’s and auditor’s side, due to the factors I have described. This is on the background of many firms facing an uncertain future, due to the decline in demand and the changing market conditions. In such circumstances, audits become even more important.
The Financial Reporting Council (FRC) acknowledged in a press release on 16 March 2020 that auditors will find the situation extremely challenging. However, it indicated that, “the current situation should not undermine the delivery of high-quality audits…”and that, “Audits should continue to comply fully with required standards.” It explained that additional time should be taken, when required, even if that comes with the risk of delaying company reporting. It set out a number of factors which should be focussed upon, given the likely impact of COVID-19, including:
Questions were then raised as to how companies could meet strict filing deadlines. On 19 March 2020, Companies House advised that a company could apply for an extension to its filing deadline if COVID-19 had adversely affected its ability to file its accounts in time. An extension must be applied for before the filing deadline, and should be accompanied by any documents which would support the application.
In the event that an audit simply cannot be completed on time, due to human elements, travel or technology, the Government has at least relaxed its rules to ensure that auditors can make alternative arrangements to ensure that its audits are carried out appropriately, professional scepticism is applied and company accounts are accurate and complete.
From the perspective of audited companies, the pressure on their finance functions in the coming weeks and months will be significant. The focus may naturally shift onto the frequent provision of financial information and forecasts, as companies face new pressures every day. Whilst there is a degree of latitude for companies and auditors in finalising and submitting accounts, the message from the FRC is clear: although there are huge other pressures, don’t forget your statutory responsibilities.
Julie Matheson is a Partner in the Regulatory team, specialising in defending professionals in the financial and legal fields. She has particular expertise in defending accountants and accountancy firms in regulatory proceedings brought by the FRC, ICAEW and ACCA. She also regularly provides advice on FCA conduct issues, particularly under the Senior Managers and Certification Schemes.
The Financial Reporting Council (the ‘FRC’) has published its Annual Enforcement Review 2021 (the ‘review’). We highlight the key trends in relation to the Enforcement Division’s activities during the past year, observations in relation to the FRC’s adoption of constructive engagement as a means of early resolution of matters, trends regarding sanctions imposed by the FRC, and priority areas of concern identified by the FRC, which are likely to impact its enforcement work over the coming year.
Every solicitor knows that an undertaking is serious stuff. Arguably it is the greatest power available to a solicitor. A promise, if broken, that will lead to immediate and serious consequences for the giver. As such it can be relied upon to the ends of the earth. The power of undertakings has meant that they sit at the heart of every property transaction, bridging the time gap between the sending of money and the receiving of title. They are also used in other areas of commercial life and as part of litigation. The “brand” of a solicitor’s undertaking is so powerful that little thought is given as to where their power comes from.
In a case that attracted national media coverage and emphasises the crucial importance of regulatory compliance and the highest standards of professional conduct in the financial services sector, the High Court dismissed a breach of contract claim brought by an investment manager.
For the fourth year the FCA has published research on the changing relationship between consumers and cryptoassets. In spite of the pandemic, the strong upward trend in public engagement and media coverage has continued, with the FCA estimating 2.3 million adults now hold cryptoassets.
This week, the Government announced that Covid-19 vaccinations will be made compulsory for care home staff, raising strong emotions on both sides of the argument.
Gone are the days of computer gaming being viewed as a secluded activity; gaming is now a thoroughly social experience that attracts a global audience of millions and players can compete for large sums of money and celebrity. This burgeoning industry is largely in a virtual world and has developed in a blockchain, decentralised fashion. Often the UK government talks up the UK gaming industry and how keen the government is to support this sector, and there have been instances that show support, but when it comes to playing games competitively, law and regulations have not yet caught up.
Global financial markets are preparing to transition away from the use of the London Interbank Offered Rate (“LIBOR”) and adopt an appropriate alternative risk free rate (“RFR”) by the end of 2021. What are the reasons for the move away from LIBOR, the progress to date in terms of identifying the Sterling Overnight Index Average (“SONIA”) as the most appropriate alternative rate in the Sterling markets, and the steps still required to be taken to ensure such markets are ready for the phasing out of LIBOR by the end of the year
At the end of last month, the Competition and Markets Authority (CMA) published a letter written to Danske Bank concerning its breach of the Small and Medium-sized Enterprise (SME) Banking Behavioural Undertakings 2002, following loans it had offered under the ‘Bounce Back Loan Scheme’.
The COVID-19 crisis has forced sports clubs, schools, universities and charities to rapidly change their approaches to coaching, teaching and support work. The regulations on social distancing have forced organisations to innovate; services which had previously been offered mostly or wholly in person were rapidly shifted online during “lockdown 1” and will return online at least for the duration of “lockdown 3”. If the vaccine rollout has the desired effect there will no doubt be some return to “traditional” methods, but it seems very unlikely that the changes brought about by the pandemic will be completely reversed. In this blog, Claire Parry from Kingsley Napley’s Regulatory team and Fred Allen from the Public Law team look at the challenges organisations face engaging with children online.
In the second blog of our audit series, Julie Matheson and Sarah Harris discuss the FRC’s recent Audit Quality Inspection report, describe how the FRC uses its powers to uphold audit quality and provide some tips on what to do if the FRC opines that one of your firm’s audits needs more than limited improvements.
Julie Matheson and Lucinda Soon consider the implications of the EU-UK Trade and Cooperation Agreement on UK accountants providing services in the EU.
As of 10 January 2021, all cryptoasset firms are required to be registered with the Financial Conduct Authority (FCA) under the Money Laundering Regulations.
FCA focuses on risks associated with unmonitored communications, including the use of unencrypted apps, such as WhatsApp, for sharing potentially sensitive or confidential information when working from home.
As we near the first anniversary of the extension of the Senior Managers & Certification Regime (SM&CR) to solo-regulated FCA firms, the first round of annual fitness and propriety assessments will be topping the to-do lists of many compliance professionals.
In this 3-part tech blog series, we’ve explored how legal and accountancy regulators are driving and responding to changes in technology and innovation in their respective professions. We’ve also considered the commercial perspective, looking at interesting developments in these sectors , particularly around the use of artificial intelligence (AI).
In this second blog in our technology and innovation series, we look at some recent developments in the use of artificial intelligence (AI) in the legal and accountancy sectors.
On 18 November 2020, the government confirmed that it is proceeding with planned changes to the Victims' Code, following a consultation that began on 5 March 2020. The changes mean that when the revised Code comes into force, it will be based on a clearly defined set of rights that set out a minimum level of service that can be expected from criminal justice agencies. It is hoped that the changes will mean victims have a greater awareness of their rights, receive the information and support when then need it and have a greater level of satisfaction with the treatment they receive in the criminal justice system.
On 19 November 2020, the High Court handed down judgment in the Professional Standards Authority for Health and Social Care’s (“PSA”) challenge to a decision of the Medical Practitioners Tribunal (“MPT”) to suspend a doctor from practice. In her judgment, Mrs Justice Farbey emphasises the significance of lack of insight to the question of sanction.
All providers registered with the Care Quality Commission (“CQC) must assure themselves that all directors who are responsible for delivering care to service users are fit and proper – in other words, they must be able to diligently carry out their responsibility to ensure the quality and safety of care. This forms part of the providers’ duty to ensure the service is well-led, which is one of the focus points during an inspection. Not only does the CQC monitor compliance at the point of registration, but it is an on-going duty and can lead to enforcement action where it is not met.
It goes without saying that Insolvency Practitioners must behave honestly and with integrity in all their professional dealings. IPs must handle money and assets in a way which justifies the trust placed in them, but some professionals don’t realise that the way they behave on a Saturday night may be just as relevant to their ability to continue in their chosen profession as the way they behave on a Monday morning.
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