A controversial proposal to update the UK FRC Revised Ethical Standard from the Financial Reporting Council in the UK states that they are proposing to enhance the prohibition (among other proposals) on certain tax services that can be provided to the majority shareholders of unlisted entities. The proposal is for this service to be banned in the UK from 15 December 2024. Please note that this is a UK proposal only and is not necessarily going to be adopted as currently worded. It does not apply to audits for Republic for Ireland entity audits.

The proposal wording is as follows (quoting from the consultation document):

Tax Services

5.67 The range of activities encompassed by the term ‘tax services’ is wide. They include where the firm:

(a) provides advice to the entity on one or more specific matters at the request of the entity; or

(b) undertakes a substantial proportion of the tax planning or compliance work for the entity; or

(c) promotes tax structures or products to the entity, the effectiveness of which is likely to be influenced by the manner in which they are accounted for in the financial statements, or in audit subject matter information;

(d) performs any of the services described in paragraphs a-c to individuals who are the majority owner(s) of an unlisted entity relevant to an engagement.

This latter service is proposed to be banned from 15/12/2024 in the UK.’ The consultation is now closed as the deadline was 31 October 2023.

The reason we bring this to the attention of our readers in Ireland is that quite often the Irish Audit & Accounting Supervisory Authority (the audit regulator in Ireland) has, in the past, incorporated similar changes to the Code of Ethics for Auditors in Ireland, sometimes with amendments, but not always.

The normal process would be for the Irish Audit & Accounting Supervisory Authority to consult in Ireland on any changes to its Code of Ethics and, taking account of feedback received, may then publish a new Ethical Standard for auditors, which would most likely not be effective before 15 December 2024. At the time of writing we have no notice of such intent on the part of the Irish Audit & Accounting Supervisory Authority.

IT Controls Assessment

Auditors are reminded that there are relatively significant changes in the requirements of ISA 315 Identifying and Assessing the Risks of Material Misstatement for accounting periods commencing 15 December 2021, which in practical terms means, accounting periods Ended 21 December 2022 and later.

Auditors dealing with the audits of entities with such accounting periods affected by these change will need, to adopt new audit programmes and, in additional to the normal audit tests, to also assess the entity’s IT controls (no matter what the size of that entity).

This is a significant new development for auditors of SMEs, in particular, and will be a game changer ion the type of audit documentation and evidence of assessment of such IT controls by the auditor on audit files.

For an easy to implement additional (two page) IT Controls Questionnaire to help document the above process, please click on this link to download immediately for only €60 + VAT.

Please also go to our website to see our:

  • Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
  • AML webinar (March 2022) available here, which accompanies the AML Manual. It explains the current legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox.
  • letters of engagement and similar templates. Please visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
  • ISQM TOOLKIT or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard, please contact John McCarthy FCA by e-mail at john@jmcc.ie.

We typically tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. The ISQM TOOLKIT 2022 is available to purchase here.