Government confirms approach to auditor rotation as part of its implementation of EU audit legislation
The Government has published a written ministerial statement on its approach to the implementation of the Statutory Audit Directive.
In particular, it will require all public interest entities (broadly, listed companies, banks, building societies and insurers) to put their audit out to tender at least every 10 years and change their auditor at least every 20 years. It also wants to ensure that public interest entities that have retendered audit engagements should benefit from transitional recognition of that retender where possible.
The Government also confirms that the Financial Reporting Council will be the UK competent authority for the regulation of auditors but that legislation will require it to delegate regulator tasks so far as is possible to recognised supervisory bodies. The intention is that 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.
A detailed consultation will be published in the coming months and will build on the Government's consideration of responses to its discussion document published in December 2014. The FRC and the Prudential Regulatory Authority have also agreed to update their rules on audit committees.