The Government will require all public interest entities i.e. listed companies, banks, building societies and relevant insurers to put their audit out to tender at least every 10 years and change their auditor at least every 20 years. The Government also intends that public interest entities that retendered audit engagements should benefit from transitional recognition of that re-tender where possible.
The Government intends that the Financial Reporting Council (the “FRC”) should be the UK competent authority for the regulation of auditors, but that legislation will require it to delegate regulatory tasks so far as is possible to recognised supervisory bodies that meet criteria set out in the legislation. Overall this would mean the FRC would only have to conduct audit inspections, investigations and disciplinary cases in relation to public interest entities, and would oversee the work of the recognised supervisory bodies for other audits.
It would still be open to a recognised supervisory body to ask the FRC to agree to undertake work that would otherwise have been delegated to the recognised supervisory bodies. As now the FRC would also have the ability to take over any particular inspection or investigation if it deemed it to be in the public interest.
To minimise the compliance cost for business the FRC and the recognised supervisory bodies will be obliged to cooperate with each other, and the legislation will provide they should all be able to rely on each other’s work.
The Government does not intend to make statutory provision for the regulation of accountants. This would be a matter for the professional bodies.
The Government will publish a more detailed consultation in the coming months building on its further consideration of the responses to the Discussion Document that my Department published last December.
The Government also welcomes the agreement of the Financial Conduct Authority and Prudential Regulation Authority to update the existing rules on Audit Committees.
This statement has also been made in the House of Commons