On 5 January 2016, the FRC published a thematic review of audit firms' internal quality control procedures. Of particular interest are a number of suggestions proposed to audit committees to help maintain the key role they play in reviewing and monitoring the effectiveness of the audit process. The report states that this should help to build investor confidence in the quality of external audits and therefore, by extension, the reliability of financial statements.
The suggestions to audit committees proposed by the FRC include:
- requesting audit firms to provide an overall annual report of their monitoring activities which will be more detailed than that which is contained in the annual Transparency Reports required by the Statutory Audit Directive to be published by auditors of UK companies with securities admitted to trading on a UK regulated exchange;
- discussing the findings of any audit review, together with any necessary remedial action, with their auditor;
- discussing with their audit partner the scope of the firm's audit monitoring to ascertain whether any UK components were included or if the review was restricted to work at group level; and
- asking whether the audit team have received any feedback from the monitoring performed by network firms responsible for audit work on overseas companies.
The full FRC report is available here:
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