What audit firms, auditors, and those with an audit qualification should do to prepare before the UK leaves the EU.
If the UK leaves the EU without a deal, the rules for auditing UK companies operating solely in the UK will not change.
There will be additional requirements for audits of UK companies operating in other European Economic Area (EEA) countries and the provision of auditing services there.
This guidance is aimed at:
- UK auditors, those with UK audit qualifications and audit firms operating in the EEA
- EEA auditors, those with EEA audit qualifications and audit firms operating in the UK
- clients of auditors and audit firms in either of the above categories
Actions for UK auditors, auditors with UK qualifications and UK audit firms
Recognition of UK audit qualifications in EEA states
If you have a UK qualification and are currently able to sign audit reports in an EEA country, you must contact the competent authority in that country to see if your UK qualifications will continue to be recognised.
To re-establish eligibility, you may either need to:
- complete a new aptitude test or adaptation period - those taken before exit day may not be recognised
- re-qualify by obtaining the relevant qualification
UK audit firms auditing EEA companies
If you expect to sign an audit report for an EEA company after the UK leaves the EU:
- check if you can with the competent authority in the country where the company is incorporated
- check what steps you need to take for your audit opinion to be valid
You may need to resign as auditor if no practical steps are available.
Third-country auditors of non-EEA firms listed on EEA-regulated market
UK-qualified auditors will have to register to be able to carry out these audits.
Contact the competent authority in the EEA state where the market is based about the application process, the information you will need to submit and timescales.
Businesses treated as public interest entities
The EU Audit Regulation will continue to apply to banks, building societies, insurers and issuers of securities that trade on UK regulated markets. These will continue to be public interest entities. Businesses that are treated as public interest entities only because they issue securities that are admitted to trade on EEA regulated markets will no longer be treated as such.
If you audit a group of companies across the EEA and the UK, including where the parent company is UK based, the government does not anticipate significant issues.
Check with the competent authorities in the countries where subsidiaries are incorporated whether there are any restrictions, including the sharing of information outside the EEA.
‘Blacklisted’ non-audit services will now be blacklisted for all overseas subsidiaries of UK public interest entities (banks, building societies, insurers and issuers of securities on UK regulated markets) so that they are prohibited if provided by the auditor of a UK public interest entity. Firms in the same network as a UK auditor to a UK public interest entity will be subject to the same prohibition of providing blacklisted services to non-EEA subsidiaries.
Actions for EEA auditors, auditors with EEA qualifications and EEA audit firms operating in the UK
EEA audit firm ownership
EEA audit firms whose required majority of qualified owners and managers includes individuals with UK audit qualifications or UK audit firms will need to:
- check with the competent authority in the country where the firm is registered whether those individuals or firms will continue to be recognised
- urgently consider whether restructuring is required to continue to be an EEA approved audit firm
EEA auditors registered with UK-recognised professional bodies
Statutory auditors don’t need to take any action.
New EEA auditor registrations in UK
EEA qualified auditors working in the UK who are not registered as a statutory auditor will have until 31 December 2020.
Contact one of the UK’s Recognised Supervisory Bodies to register as a statutory auditor.
You can begin the process by passing an aptitude test.
Auditors from the Republic of Ireland are largely unaffected. Only auditors that are qualified as members of CPA Ireland will need to sit an aptitude test.
UK audit firm ownership
All individual EEA auditors will be eligible to be included in a UK firm’s required majorities of qualified owners and managers. Those that have not registered in the UK as a statutory auditor will lose this eligibility on 1 January 2021.
EEA audit firms will similarly be eligible to be included in a UK firm’s required majorities of qualified owners and managers. EEA audit firms, apart from those from Ireland that are registered with a UK Recognised Supervisory Body, will lose this eligibility on 1 January 2021.
UK issuers of shares or debt securities that are only admitted to trading on EEA regulated markets will not be subject to the requirements in the Disclosure and Transparency Rules issued by the FCA.
All other UK public interest entities (banks, building societies, insurers and issuers of securities that trade on UK regulated markets) will still be subject to the Disclosure and Transparency Rules issued by the FCA, and other rules issued by the Prudential Regulation Authority (PRA).
The current exemptions in these rules for businesses with a parent company that is subject to the same requirement will continue to apply if the parent is incorporated in the UK.
For subsidiaries that are issuers of securities on UK regulated markets, the parent may be subject either to the FCA’s or the PRA’s rules. For subsidiaries that are banks or insurers and qualify under the more limited exemption provided by the PRA, the parent must be subject to the PRA’s rules.
- Accounting and Audit if there’s no Brexit deal: letters to the sector
- Providing services to EEA and EFTA countries after EU exit
Check if your business is fully compliant with the relevant accounting and reporting requirements:
- Providing services including those of a qualified professional if there’s no Brexit deal
- Accounts and Reports (Amendment) (EU Exit) Regulations 2019
- Statutory Auditors and Third-Country Auditors (Amendment) (EU Exit) Regulations 2019
- International Accounting Standards and European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2019