5 key issues from this year’s audit season

As the main audit and reporting season for firms with 31 December accounting reference date has now come to an end, it is an appropriate time to reflect on a number of the key issues that we have identified this year. In particular, we have pinpointed five key areas:

1. Changes to the audit report

These changes have meant that audit firms have been required to focus more on the other information included within the financial statements, and in particular the strategic report to ensure that this report includes all of the requirements noted within the Companies Act. A number of firms may have therefore had to expand their strategic report this year. Other changes in the audit report have focussed on the going concern status of the firm and this has meant that auditors are now required to receive, in writing, management’s assessment of the going concern status of the firm.

2. The challenge of client asset audits

CASS audits have continued to test firms and auditors with the second year of the FRC Assurance Standard. Two of the key themes we continue to see are the challenges firms have in creating an internal cash book for the internal client money reconciliations. One other breach that has caught out a number of firms is the requirement to document the firm’s consideration of the bank signatory on the client money acknowledgement letters. This is a minor breach, but one that can be easily remedied.

3. Testing of journal adjustments

Following guidance from the FRC, firms will have noticed that auditors have been placing much more emphasis on this area. This is unlikely to change anytime soon and so firms should be prepared for more detailed testing of journals.

4. Re-submission of FCA returns

Following the completion of their audits, firms should consider whether it will be necessary to resubmit their FCA returns following any audit adjustments made. If there have been significant changes between the results reported to the FCA on the FSA 001, FSA 002 and FSA 003 forms for December 2017 compared to the audited financial statements, firm should resubmit the relevant returns.

5. Complexity of group structure  

If you have found the burden of preparing statutory accounts onerous then you should consider whether there are any legal entities in your group structure that are dormant, redundant or undertaking duplicate activities that could be eliminated.  Even a complex project to simplify the group structure could be completed before the next deadline for filing accounts and therefore reduce the filing burden for the year ended 31 December 2018. A reduction in the number of intercompany transactions, reduced tax and regulatory compliance and improved risk management and transparency resulting from simplification of the structure will also benefit the firm.

Our team can help to drastically reduce the number of challenges that your firm faces during audit season. For further details or to discuss the challenges mentioned above, please contact our corporate audit team.

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