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Press release Box-ID: 973358

ECOVIS AG Steuerberatungsgesellschaft Ernst-Reuter-Platz 10 10587 Berlin, Germany http://www.ecovis.com
Contact Ms Gudrun Bergdolt +49 89 5898266

Changes to be navigated by Ecovis UK over the coming years

ECOVIS Wingrave Yeats recently registered as a non-US registered firm with the Public Company Accounting Oversight Board (PCAOB) in order to ensure that our UK audits meet the needs of all stakeholders in future

(PresseBox) (Berlin, )
Luckily, we have a culture of embracing change at Ecovis in the UK because it looks like it could be a busy few years ahead. The PCAOB is an organisation that is going through significant change itself, so it is comforting to know we can lean on Marcum for support to ensure that we are fully compliant with the PCAOB’s standards and rules. The changes that are likely to arise in the UK audit market, however, are something that we will have to manage ourselves.

Primarily as a result of some high-profile corporate failures, several reviews are being undertaken to ensure that UK audits meet the needs of all stakeholders in future. The reviews being undertaken are as follows:
  • Department for Business, Energy and Industrial Strategy Select Committee (“BEIS Select Committee”) – review on the future of audit
  • The Competition and Markets Authority (“CMA”) – review on the statutory audit market
  • Kingman Review – independent review on the future of the Financial Reporting Council (“FRC”)
  • FRC review of the 2016 ethical and auditing standards
  • Druckman Review – FRC review of the future of corporate reporting
  • Brydon Review – independent review of auditing standards
  • FRC review of the proposed revisions to the UK Stewardship Code
Most of these reviews are expected to be completed by the end of 2019 or early 2020 with clear guidance on the changes to be issued, but at the time of writing we have had an update paper from the CMA, the recommendations from the Kingman Review and the publication of the BEIS Select Committee report. Some of the key announcements are as follows:

CMA update paper
  • operational split of the Big 4 which will require separate management, accounts and remuneration: a separate CEO and board for the audit arm, populated by a majority of independent non-executives
  • mandatory joint audits, except in the case of the largest audits
  • greater oversight of audit committees by regulators and shareholders
  • increased oversight powers for regulators – replacing the FRC with a new body with increased powers called the Audit Regulation and Governance Authority (“ARGA”)
  • review of the changes to the audit market to take place five years after implementation
Kingman review recommendations
  • The FRC needs to be rebuilt from the ground up, with “a clear and precise sense of purpose and mission”.
  • The FRC board and staffing need an overhaul, with its current approach to board and council recruitment “surprisingly, and inappropriately, informal”.
  • The proposed new body, the ARGA, should receive statutory funding rather than rely on a voluntary levy from audit firms.
  • The ARGA should maintain the remit of improving corporate reporting, but it needs to have an expanded role in addressing and discussing audit quality.
  • It would not be “practical or desirable” for the ARGA to have “general responsibility” to prevent corporate failures, but it should keep an eye on market “warning signs” that companies may be at risk.
  • Introduction of a “duty of alert” for auditors to report “viability or other serious concerns” which is similar to the system in place in France
  • ARGA to be given certain expanded powers, for example to be able to commission a “skilled person review”, paid for by the company, in which a suitable individual inspects a firm.
  • ARGA to have the power to make recommendations to a company’s shareholders that they take action such as cutting dividends or firing senior staff, in “serious cases” where “the severity of the facts” merits an intervention
BEIS Committee recommendations
  • full structural separation (not just operational) of the Big 4 audit businesses
  • segmental market cap to increase competition
  • piloting of joint audits
  • more frequent audit rotations of seven-year non-renewable terms, with a cooling-off period of three years if there is an operational split of the Big 4 audit businesses
  • backing of the Kingman Review recommendations
  • ARGA should make graduated findings mandatory and Sir Donald Brydon should consider extending the scope of audit to cover the entire annual report.
  • FRC to remind directors and auditors of their duties urgently and impose severe sanctions for breaches in respect of capital maintenance and accounting for distributable reserves
The recommendations have met with mixed responses from the profession and it is likely that there will be changes and developments over the coming months. But what is clear is that change is coming and it is time to embrace the change and find the opportunity.

Author

Stuart Hinds, Audit and Advisory Partner, ECOVIS Wingrave Yeats, London, UK

Email: stuart.hinds@ecovis.co.uk

ECOVIS AG Steuerberatungsgesellschaft

Ecovis is a leading global consulting firm with its origins in Continental Europe. It has over 7,500 people operating in over 75 countries. Its consulting focus and core competencies lie in the areas of tax consultation, accounting, auditing and legal advice.

The particular strength of Ecovis is the combination of personal advice at a local level with the general expertise of an international and interdisciplinary network of professionals. Every Ecovis office can rely on qualified specialists in the back offices as well as on the specific industrial or national know-how of all the Ecovis experts worldwide. This diversified expertise provides clients with effective support, especially in the fields of international transactions and investments – from preparation in the client’s home country to support in the target country.

In its consulting work Ecovis concentrates mainly on mid-sized firms. Both nationally and internationally, its one-stop-shop concept ensures all-round support in legal, fiscal, managerial and administrative issues.

The name Ecovis, a combination of the terms economy and vision, expresses both its international character and its focus on the future and growth.

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The publisher indicated in each case is solely responsible for the press releases above, the event or job offer displayed, and the image and sound material used (see company info when clicking on image/message title or company info right column). As a rule, the publisher is also the author of the press releases and the attached image, sound and information material. The use of information published here is generally free of charge for personal information and editorial processing. Please clarify any copyright issues with the stated publisher before further use. In case of publication, please send a specimen copy to service@pressebox.de.