APB finalises changes to Ethical Standard 3

The Auditing Practices Board has issued a final version of ES 3 (Revised) ‘Long association with the audit engagement’ that applies for periods commencing on or after 15 December 2009. The main revision of the standard is in respect of the period for the rotation of the audit engagement partner on listed company audits that could be extended from five to seven years in certain circumstances. In addition to such revision, changes have also been made to ES 3 (Revised) in respect of the rotation period for engagement quality control reviewers and further guidance has been included on factors affecting the significance of the threat to independence where other partners and senior staff are in senior positions for a long period of time.

The revision of ES 3 follows the consultation launched by the APB in March 2009 that also included proposed changes to the Ethical Standards for Auditors (ESs) on a number of other topics including:

  • remuneration and evaluation policies for key partners involved in the audit,
  • the provision of non-audit services relating to securitisation and restructuring services, and
  • the definition of an audited entity’s ‘affiliate’.

The APB has also recently issued a consultation paper in response to the Treasury Select Committee’s recommendation that the provision of non-audit services by auditors to the entities that they audit to be revisited, as set out in their report ‘Banking Crisis: reforming corporate governance and pay in the City'. As a number of the topics addressed in the APB’s March 2009 Consultation Paper relate to non-audit services, and to avoid those implementation problems that arise from frequent changes to the ESs, the APB has decided to defer changes to the ESs, other than to ES 3 (Revised), until it has decided how to respond to comments received on its consultation on non-audit services.
A copy of the final ES 3 (Revised) ‘Long association with the audit engagement’, and the feedback paper explaining the APB’s response to the consultation can be downloaded from the publications section of APB’s website (visit the related links section of this page for further information).