FRC: Revision to ISA (UK and Ireland) 700, requiring the auditor’s report to address risks of material misstatement, materiality and a summary of the audit scope

Comments from ACCA to the Financial Reporting Council (FRC), 30 April 2013.

ACCA welcomes the opportunity to comment on the proposals issued by the Financial Reporting Council (the FRC). UK members of the ACCA Global Forum for Audit and Assurance have considered the matters raised and their views are represented in the following:

Overall comments

We welcome the steps taken by the FRC to give effect to its Effective Company Stewardship proposals in the UK and Ireland. Taken together with other measures already put in place, we welcome and support the proposed revision of International Standard on Auditing (UK and Ireland) 700 The auditor’s report on financial statements.

It is unfortunate that the FRC and the International Auditing and Assurance Standards Board have not been able to move forward together in the area of auditor reporting because of the well-known benefits of the application of global standards. We acknowledge, however, the need to respond in a timely fashion to pressure for change both in the UK and Ireland and at the level of the European Union.

We also note the structural advantage possessed by the FRC, which is capable of steering both auditing and corporate governance. Enhancements requiring co-ordination between corporate reporting and auditing are thus capable of implementation quickly and uniformly; something that is not currently possible globally.

As recognised in the consultation paper, the current proposals can be regarded as 'auditor commentary', a form of reporting on which the IAASB has consulted in its auditor reporting project. It is to be hoped, therefore, that the outcome of this FRC consultation will also benefit the development of global standards and that convergence to them in the UK and Ireland will ultimately be to an enhanced common position.

As we state in the body of this response, the benefits to be realised through the current proposals are best appreciated in the context of, and inseparably from, the other measures taken in relation to Effective Company Stewardship. We have not, therefore, sought to address the components separately.

ACCA’s full comments are available in the related document.