PracticeAuditUK readies for US audit changes

UK readies for US audit changes

The introduction of a new audit rule in the US could result in a profound change in the way audits are undertaken and reported in this country.

Link: PCAOB to favour ‘less intrusive role’ in UK

The Public Company Accounting Oversight Board last week issued a draft standard that requires management to make a statement in a company’s annual report on the effectiveness of its internal controls and for the external auditor to support this statement. It will affect all UK companies with a US listing.

‘We’re going to have a situation where nearly half of the FTSE 100 companies will have these requirements and the rest will not,’ said Andrew Ratcliffe, chairman of the ICAEW’s audit faculty. ‘Investors will not see this as sustainable in the long term.’

Ratcliffe warned that, unless the issue of internal control in the UK was looked at again, then investors could demand UK companies comply with US requirements by default.

The Financial Reporting Council said it had no current plans for changes to the combined code, but any collective plea from investors for changes in this area would be taken seriously.

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