UK independent auditors outsourced audit workIndependent Auditors LLP - outsourced audit work & chartered accountants based in Shrewsbury, Shropshire
shropshire independent auditors, outsourcing audit work
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independent auditors outsourcing audit work
welcome to Independent Auditors LLP, outsourced audit work based in Shrewsbury, Shropshire  
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Independent outsourced audit work for small accountancy firms
small accountancy firms outsource audit work

Welcome to Independent Auditors LLP - audit outsourcing work for small accountancy firms

 

 

 

 

 

Impact of International Auditing Standard & Ethical Standards

On 6th October 2011, the Department for Business, Innovation and Skills announced a formal consultation to increase audit exemptions for small & medium-sized entities (SMEs). The proposals, which could come into effect for periods ending in October 2012 onwards, will enable more SMEs to decide whether or not to have an audit.

Currently a company must be audited if it fails either of the following 2 criteria:

  • Turnover < 

  • Gross Assets < m

The proposals would mean a company would require an audit if it fails 2 out of the following 3 criteria:

  • Turnover < 

  • Gross Assets < m

  • < 50 Employees

There are also proposals to exempt most subsidiary companies from mandatory audit, provided their parent is prepared to guarantee their debts. These proposals would move a number of companies out of the requirement for statutory audit, and firms could find themselves with fewer audits and more difficulty completing the required work efficiently.

The introduction of Clarified ISA's for accounting periods ending on or after 15 December 2010 has further increased the level of regulations that statutory auditors must adhere to. It has been seen that the increase in audit work resulting from the introduction of Clarified ISA's has been between 5% and 10% potentially even higher for those firms without a large number of audit clients due to the associated learning curve. It is anticipated that in the current economic climate it will continue to be difficult for practices to recover the additional costs.

The main areas of change regarding the Clarified ISA's has increased audit work on related party transactions, accounting estimates as well as significantly increasing work for auditors of groups.

All of the above changes need to be considered in addition to the original International Auditing Standards which were introduced in 2004 which raised the following issues:

  • Auditors of clients which consistently provide 15% (10% for listed clients) of either a practice࡮nual income or where profits are not equally shared, a partner࡮nual income from the practice, will have to resign. The practice can continue to provide non-audit services to the client but will not be able to continue to act as auditor.

  • Auditors of clients which consistently provide 10% (5% for listed clients) of a practice੮come will have to arrange for external quality control reviews prior to sign-off of the audit report.

  • All listed or public interest clients should include an independent partner review to ensure that the practice has considered all threats to independence and introduced safeguards to preserve independence.

  • Where the same audit engagement partner or key member of an audit team have been involved with a client for a number of years, steps must be taken to ensure that independence is maintained. It is recommended that where individuals have acted for 10 years for an unlisted client and 5 years for listed clients that staff are rotated. Alternatively, external reviews should be undertaken to ensure that the practice is independent.

  • Where a partner involved in the audit of a client in the preceding two years leaves the practice to become a member of key management of that client, the practice should resign as auditor until a period of two years has elapsed since the date the former partner joined the client.

  • Appropriate safeguards must be introduced where a firm provides non-audit services to an audit client. Specific examples include tax planning work provided by a firm which could be judged to affect its ability to provide an audit opinion as it attempts to justify the tax planning option chosen. Additionally, where the same staff member undertakes the audit work and prepares the corporation tax computations, a review must be undertaken on the corporation tax by another individual within the firm.

  • Firms with at least three Responsible Individuals are required to appoint an Ethics partner whose responsibility is to ensure that the firm and engagement partners are complying with the relevant ethical standards.

  • Increased depth of audit work due to the more demanding nature of some of the ISAs has place much more emphasis on identification of potential risks and implementation of specific audit testing to ensure that these risks are adequately considered. This risk based approach is coupled by much more extensive guidance with regard to the identification and consideration of potential fraud and this subsequently results in an increased workload for the auditor.

The overall picture is much more heavily regulated sector which further enhances the view that audit is a specialism rather than a key component of the services offered by traditional accountancy practices.

Registered to carry on audit work in the UK and Ireland by the Institute of Chartered Accountants in England and Wales.

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