APB to test new 'lighter touch' audit

The Auditing Practices Board published a discussion paper on the proposed Independent Professional Review in May, but only received around 25 responses, most of which were from accountants. The APB had hoped for more input from users and preparers of audits.

Ian Plaistowe, APB chairman, said of the project: ‘Views vary regarding the benefits of the proposal to replace a statutory audit for smaller companies with an independent review. This research project provides an opportunity to obtain objective information to inform the debate.’

The idea for an IPR was originally mooted by Stephen Byres as a result of the announcement to raise the statutory audit threshold, exempting companies with a turnover of £1m or less. Byres also indicated he intended to raise the threshold to £4.8m at a later date.

The APB will measure costs and effectiveness using its model with the help of audit firms and professional bodies in field tests that will begin next year.

Respondents to the APB’s discussion paper also voiced concerns over the unclear definition of the procedures, reaction of banks and whether the IPR was sufficiently distinguished from an audit in the eyes of shareholders and users as to the extent of assurance provided.

The idea of an IPR is also being discussed as part of the three-year long project to update Company Law. Jonathan Rickford, Company Law Review project director, said: ‘The consultation document published by the Company Law Review in March sought views on the proposal that the IPR might replace the statutory audit above the current threshold of £1m turnover and up to £4.8m.

‘Whilst there was a good measure of support for this idea there were also significant concerns, based on uncertainty, as to the costs and benefits of the IPR. We are therefore pleased that the APB will put these issues to the test by carrying out field tests,’ he added.