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.
Audit is more in the spotlight than ever. The financial news pages seem to have a constant stream of stories about corporate collapses, with the inevitable commentary about how the auditor of the collapsed entity is likely to face a regulatory investigation.
Following a number of high-profile corporate collapses in the last few years, audit quality has been the subject of intense regulatory focus. In recent times, significant changes to audit regulation were proposed by Sir John Kingman; the CMA made recommendations around ‘operational split’; and, late last year, Sir Donald Brydon endorsed the CMA’s suggested approach in recommending the formation of a separate audit industry with its own governing principles.
Following the Court of Appeal decision in Sports Direct International Plc and The Financial Reporting Council  EWCA Civ 177 (which we discussed here), a recent High Court decision provides further guidance on legal professional privilege and its application in Financial Reporting Council (FRC) proceedings.
It may come as a surprise to learn that anyone can use the title accountant without having any formal qualification or membership of a professional body. The use of the term ‘Chartered Accountant’ is more controversial. We examine the nuances of these designations in the current regulatory regime, when they can be used and what consequences an individual may face for any perceived misuse.