Following the Central Bank of Ireland’s Dear CEO letter of 20 January 2023 and, in particular, the requirement that payment and e-money firms obtain a specific audit of their compliance with the safeguarding requirements under the PSR/EMR an acceptable format for these engagements has been agreed. We will issue guidance to our members on performing these engagements in due course.  Payment and e-money firms are required to prepare a detailed document setting out a description of aspects of their organisational arrangements to secure their compliance with the relevant safeguarding requirements under the PSR/EMR.   Theses forms should also prepare an assertion, approved by the Board of directors, stating that in all material respects 1 the description is fairly presented, and 2 the controls and processes included in the description were operating as described at the reference date. Further details are outlined in the Safeguarding Notice to Payment and E-Money Firms. These reports are due by 31 October 2023.  Members will be informed via eNews when our guidance is published. 

Chartered Accountants Ireland has responded to the IAASB consultation on the Proposed Part 10, Audits of Group Financial Statements of The Proposed ISA For Audits of Financial Statements of Less Complex Entities (ISA for LCE).  The initial proposed ISA for LCE (in 2022) excluded all groups from the scope of the standard, the proposed changes would include some groups, a move we welcome in our response. The IAASB envisions approving a final standard in December 2023. Institute responses to recent consultations can be read here.

The International Ethics Standards Board for Accountants (IESBA) has released final revisions to the International Code of Ethics for Professional Accountants (including International Independence Standards) to further increase the Code’s robustness and expand its relevance in a world being fundamentally reshaped by rapid technological advancements and accelerating digitalization. These technology-related revisions will guide the ethical mindset and behavior of professional accountants in both business and public practice as they take advantage of the opportunities created by technology and adapt to new technology. Developed to remain relevant and applicable in the ever-evolving landscape of technology transformation, the revisions apply to the use of any technology, including to the extent possible, future technologies.  The revisions, which were informed by extensive fact-finding and stakeholder outreach: Strengthen the Code in guiding the mindset and behavior of professional accountants when they use technology. Provide enhanced guidance fit for the digital age in relation to the fundamental principles of confidentiality, and professional competence and due care, as well as in dealing with circumstances of complexity. Strengthen and clarify the International Independence Standards (IIS) by addressing the circumstances in which firms and network firms may or may not provide a technology-related non-assurance service to an audit or assurance client. The revisions to the IIS will be effective for audits and reviews of financial statements for periods beginning on or after December 15, 2024. The other revisions to the ethics provisions of the Code will be effective as of December 15, 2024. Early adoption is permitted.

The Law Society has published new Solicitors Accounts Regulations which come into operation on 1 July 2023 replacing the current regulations issued in 2014. The key impacts on the reporting accountants are:  Reporting accountant’s reports are to be filed within five months of the accounting date. Reporting accountant to test check postings before and after accounting date. Reporting accountants to test check that withdrawals of fees are notified to the clients. Reporting accountants may report, directly to the Law Society, an opinion or a suspicion of a deficit, rather than waiting to submit annual report. Closing reporting accountant’s reports are to be filed within three months of cessation. Reasons are to be provided for withdrawal of approval of a Reporting accountant. A listing of client ledger balances outstanding two years or more is to be prepared at the accounting date and furnished to the Law Society by the Reporting Accountant. For further information on the significant changes that impact on solicitors see the Law Society webpage.  The new regulations can be accessed here  Further information and updated guidance will be published by Chartered Accountants Ireland in due course. 

The FRC has issued guidance for audit firms on eligibility criteria in the context of the firm’s system of quality management and the performance of engagements. ISQM (UK) 1 and ISQM (UK) 2 have been reissued with updated footnotes to reflect this guidance.   View the guidance and ISQMs (UK).

The Irish Auditing and Accounting Supervisory Authority (IAASA) has published a summary of the outcomes of its examinations of financial reports completed in 2022. This summary outlines the findings from financial statement examinations completed by IAASA’s Financial Reporting Supervision Unit in 2022. The summary shows that the level of compliance by companies with financial reporting requirements is generally good particularly among equity issuers. However, certain companies, particularly some fund and debt issuers, have further progress to make in achieving consistently high-quality financial reports. Utilising the range of powers at its disposal, three companies were required by IAASA to publish corrective public notices which highlighted deficiencies in their published financial reports. The summary illustrates the growing impact of climate change and climate impact mitigation initiatives on companies. It also reflects the increasing focus of IAASA and accounting enforcers generally on the financial reporting implications of climate change and climate commitments by companies. This is a feature that we expect to assume increasing significance in the future as companies move to comply with emerging climate reporting standards. The summary may be accessed here

IAASA has published the 2022 quality assurance review reports in respect of seven firms that perform statutory audits of public-interest entities. In Ireland, public-interest entities include listed companies and companies that operate in the banking and insurance sectors. The reports can be accessed here

A new publication from Accountancy Europe builds on the factsheet published last year and offers constructive recommendations based on the discussions with their members’ audit experts as well as external stakeholders involved in developing AQI initiatives in their respective jurisdictions. The paper highlights the key considerations for developing and using AQIs to support potential debates that could take place among the European Commission, the Committee of European Audit Oversight Bodies (CEAOB), national policymakers and regulators, auditors, as well as other parties. Accountancy Europe want to keep contributing to this debate; since the evolution of AQI reporting as a means to support audit quality requires continuous discussion with all relevant stakeholders. To support this objective and build on the factsheet (May 2022), this publication: defines key concepts related to audit quality presents considerations for developing Audit Quality Indicators (AQIs) explains what can and cannot be achieved by AQI reporting AQIs are not ends themselves but are one important means to increase the audit work’s transparency and to support consistent, high-quality audits. A blend of AQIs can help focus on the areas where improvement is needed. Key factors to develop and use audit quality indicators - Accountancy Europe

This video provides information on the revised ISA (Ireland) 315 Identifying and Assessing the Risks of Material Misstatement. ISA 315 is effective for financial periods beginning on or after 15 December 2021. IAASA video presentation on the revised ISA (Ireland) 315 – IAASA

IAASA has published its key messages for auditors in the area of related parties, available here . IAASA’s YouTube channel also now includes a video that shares questions asked by IAASA’s audit inspectors during 2022 in the area of related parties, available here.

The Financial Reporting Council (FRC) has announced its areas of supervisory focus for 2023/24, including priority sectors, for corporate reporting reviews and audit quality inspection The FRC’s Supervision Division will supplement its routine reviews of corporate reporting and audits with a number of thematic reviews.  These reviews will identify scope for improvement, as well as examples of better practice. The FRC will conduct the work over the course of the year, as resources allow, and will release the findings in a range of forms.   The FRC’s Audit Quality Review team will pay particular attention in its audit quality inspections to areas including going concern, fraud risks, climate-related risks, and risk identification and assessment.   In selecting corporate reports and audits for review, the FRC will prioritise sectors that are under particular pressure. Thematic reviews of corporate reporting   The Corporate Reporting Review team will conduct four thematic reviews during the next year: Insurance contracts (IFRS 17): The new standard on insurance contracts will have a significant effect on corporate reporting in the insurance sector. The FRC will review a selection of insurers’ 2023 interim accounts to identify compliance with IFRS 17 and examples of good disclosures. Large private companies: The proposed change to the definition of a Public Interest Entity will bring an enhanced regulatory focus on the largest private companies. The Government’s intended threshold is entities that exceed £750 million annual revenue and 750 employees. The FRC will review a selection of private companies’ annual reports to identify whether and where there are areas of poor compliance with reporting requirements with a view to informing our monitoring activities going ahead.  Task Force on Climate-related financial Disclosures (TCFD) – metrics and targets: climate-related metrics and targets, including companies’ “net zero” plans, are seen as increasingly important by investors, and the TCFD’s recommendations in this area were updated in 2021. Following the FRC’s thematic review of TCFD disclosures in 2022 (carried out in collaboration with the FCA) which highlighted room for improvement in many companies’ metrics and targets disclosures, the FRC will undertake a targeted follow-up in 2023, with a focus on the metrics and targets disclosures of companies from four relevant sectors. The FRC will also consider how adequately these companies’ net zero commitments have been addressed in their financial statements. Fair value measurement (IFRS 13):  The FRC’s review will focus on companies in the non-financial sector, and will provide an overview of the disclosure requirements of the standard, highlighting examples of better disclosure and common pitfalls. Thematic reviews of audit When identifying audit thematic reviews, the FRS has considered carefully how topics align with and complement the monitoring of the imminently effective new quality standard for firms, ISQM 1. The new standard is a more holistic and integrated standard, covering all elements of firms’ systems of quality management for their audit practice and so the thematic work more naturally overlaps with this. The FRC has selected the following topics to be covered in this inspection cycle: Sampling Hot reviews Network resources and service providers Root cause analysis  Areas of focus for audit quality inspections   The FRC’s programme of audit quality inspections will pay particular attention to the auditor’s work in the following areas: Going concern Fraud risks Climate-related risks, including the linkage between the audited financial statements and climate-related disclosures elsewhere in the Annual Report    The application of the revised Auditing Standard on risk identification and assessment (ISA (UK) 315). Other areas, including prior year areas of focus, will continue to be selected for review on individual audits applying a risk-based approach (with any financial reporting concerns identified, for example, potentially material errors in the cash flow statement, taken into account). Priority sectors In selecting both corporate reports and audits for review, the FRC will give priority to the following sectors: Travel, Hospitality and Leisure  Retail and Personal Goods Construction and Materials Industrial Transportation   These sectors are considered by the FRC to be higher risk, for corporate reporting and audit, by virtue of economic or other pressures.    Given the difficult economic conditions that are currently being experienced, we recognise that many companies, in many different sectors, are currently under particular commercial and financial pressure. We will therefore be especially careful over the coming year in monitoring where these pressures are being felt most acutely, and tailor our selection of company reports for review and audits for inspection accordingly.    

The International Federation of Accountants (IFAC) has released a new resource, The Risk Identification and Assessment Process: Tips on Implementing ISA 315 (Revised 2019). The tool helps auditors implement the International Auditing and Assurance Standards Board’s (IAASB) International Standard on Auditing (ISA) 315 (Revised 2019), Identifying and Assessing the Risks of Material Misstatement, which is effective for audits of financial statements for periods beginning on or after December 15, 2021. The implementation tool provides an overview of core concepts and explains new and previously existing requirements. It also includes examples and emphasizes the scalability of the standard with a focus on less complex entities. The tool does not replace the need to read ISA 315 (Revised 2019), including its application and other explanatory material.  The resource is based on Chartered Professional Accountants of Canada’s (CPA Canada) Implementation Tool for Auditors and follows the release earlier this year of IFAC’s Auditing Accounting Estimates: ISA 540 (Revised) Implementation Tool. These tools support efforts to improve audit quality globally and, more broadly, international standards’ adoption and implementation. Additional guidance and resources are available on the dedicated Supporting International Standards section of the IFAC Knowledge Gateway.