The UK Government will ensure that the UK continues to have a functioning regulatory framework for accountancy and audit firms in the event of a no deal Brexit, according reassurances offered in its latest guidance notice.
Regulations for audits of UK companies operating solely within the UK will be unchanged, but there will be additional requirements for the audits of companies operating cross-border, and for cross-border audit services.
There will be a transitional period until the end of December 2020, during which individuals will be able to apply for their EU audit qualifications to be recognised in the UK, while EU auditor registrations will continue to be recognised in the UK. Additionally, EU audit firms will continue to count towards the majority of "appropriately qualified persons" tests for owning UK audit firms.
During this period they can apply to be recognised as auditors in the UK by passing an aptitude test. After this, EU auditors’ qualifications will no longer be automatically recognised in the UK, but those who were recognised as a result of an aptitude test process will still be recognised. Auditors with Irish qualifications don’t require an aptitude test as these qualifications are granted by UK qualifying bodies.
UK businesses with an EU branch will become third country businesses and will be required to comply with specific accounting and reporting requirements for such businesses in the member state in which they operate.
Additionally, there will be changes to reporting requirements which will have implications on UK accounting and company secretariat service providers interacting with clients. For example, in order to sign audit reports the auditor must be in possession of a UK-recognised qualification.
After the transitional period, only owners or managers with UK-recognised qualifications will count towards the majority of appropriately qualified owners or managers of a UK audit firm. However, EU qualified individuals who were recognised as part of the management body previously will continue to be recognised.
EU audit firms will not be recognised among the required majority of suitably qualified owners as from the end of December 2020.
Branches of EU companies established in the UK will become subject to additional requirements under the overseas companies regime, and will be subject to the same accounting and reporting requirements as non-EU companies with a UK branch.
UK businesses should be aware of the specific accounting and reporting requirements of any member state in which they operate and those listed on an EU market should be aware of EU third country requirements for listed entities.
These companies may also need to provide additional assurance to the relevant listing authority that their accounts comply with International Financial Reporting Standards as issued by the International Accounting Standard Board. In the short term, this could lead to changes to the compliance statements which are required within the annual accounts submitted to listing authorities.
Finally, the guidance stated that UK legal, accounting and company secretariat service providers to UK or EU businesses with operations and listings in both the UK and the EU will need to ensure that their clients are aware of the additional reporting requirements, and the need to obtain additional agreements and assurances.
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