Lecture 8 Flashcards
What are the key players in global audit regulation?
IFAC (International Federation of Accountants) – Sets global auditing, ethics, and education standards.
IAASB (International Auditing and Assurance Standards Board) – Develops international auditing and assurance standards.
IESBA (International Ethics Standards Board for Accountants) – Sets ethical standards.
European Commission (EC) – Sets legal requirements for EU members (historically linked to the UK pre-Brexit).
UK FRC (Financial Reporting Council) – Oversees audit and ethical standards in the UK.
PCAOB (Public Company Accounting Oversight Board) – Oversees audits of US public companies.
What is the role of IFAC?
Supports the adoption of high-quality international standards in auditing, ethics, and education.
Promotes global collaboration among accountancy bodies.
Represents the accounting profession in the public interest.
What is the governance structure of IFAC?
Council: Composed of representatives from member organizations, responsible for ultimate governance.
Board: Oversees operations and policies.
PIOB (Public Interest Oversight Board): Ensures that standards reflect the public interest.
Who are IFAC’s members?
Over 180 member organizations in 135 countries, representing more than 3 million accountants.
Members include professional accountancy organizations like the ICAEW, ACCA, and CIMA in the UK.
What are the responsibilities of the IAASB?
Sets high-quality international standards for auditing, assurance, and related services.
Facilitates global convergence of auditing practices.
Enhances public confidence in the auditing profession.
What is the history of the IAASB?
Established as the International Auditing Practices Committee (IAPC) in 1978.
Renamed IAASB in 2002 after reforms to strengthen public interest responsiveness.
Developed ISAs (International Standards on Auditing) to ensure clarity and quality in audits.
What are the IAASB’s strategic priorities for 2020–2023?
Address emerging issues like sustainability and technology.
Strengthen relationships with stakeholders.
Innovate to maintain globally relevant and high-quality standards.
What is the role of the European Commission in audit regulation?
Proposes legislation and ensures the proper application of EU laws.
Focuses on improving audit quality, independence, and market dynamics.
What were the goals of the 2016 EU audit reform?
Improve auditor independence.
Enhance transparency and informational value of audit reports.
Introduce mandatory firm rotation for Public Interest Entities (PIEs).
Restrict non-audit services to audit clients.
What is the role of the FRC?
Independent regulator responsible for corporate governance and reporting in the UK.
Oversees audit and ethical standards and enforces compliance with the Companies Act 2006.
Issues the UK Corporate Governance Code and Stewardship Code.
What changes were proposed by the Kingman Review of the FRC?
Recommended replacing the FRC with a fully statutory body called the Audit, Reporting, and Governance Authority (ARGA).
Aimed at strengthening regulatory oversight and restoring trust in audits.
Why was the PCAOB created, and what does it do?
Created under the Sarbanes-Oxley Act of 2002 to oversee audits of US public companies.
Ensures that audits provide accurate and independent reports to protect investors and public interest.
Operates under the oversight of the SEC (Securities and Exchange Commission).
What are some issues to consider in the future of auditing?
Audit failures and loss of public trust.
Lack of competition in the audit market, especially among the Big 4 firms.
Proposed reforms like operational separation of audit and non-audit services.
Developing standards for sustainability and technology-related audits.
What is the significance of the Brydon Review?
Proposed redefining the scope of audit to meet the needs of stakeholders more effectively.
Suggested mechanisms to enhance shareholder engagement and improve audit quality.
What is the “expectation gap” in auditing?
The difference between what the public expects auditors to do (e.g., detect all fraud) and what auditors are actually responsible for (e.g., providing reasonable assurance about financial statements).
