FOR IMMEDIATE RELEASE: 27.03.09
CCAB PUBLISHES VOLUNTARY CODE OF PRACTICE ON DISCLOSURE OF AUDIT PROFITABILITY
The Consultative Committee of Accountancy Bodies (CCAB) has published guidance to audit firms on the voluntary disclosure of the financial results of their work on statutory audits and directly related services. The Code takes effect for accounting periods beginning on or after 6 April 2009.
Publication of the Code responds to a call from the Financial Reporting Council (FRC) for more comparable reporting of audit profitability. An exposure draft was published in September 2008.
The Code applies to any UK audit firm that is ‘major firm’ according to the criteria laid down by the Professional Oversight Board (POB). Major firms carry out more than ten audits of public interest entities, as determined by the POB. A major firm is subject to a full-scope inspection by the Audit Inspection Unit. In March 2009 there were nine major firms.
The main aims of the FRC in requesting the Code were to achieve greater consistency in the definition of the audit segment and in the way firms allocate overheads to that segment in their published reports. The Code therefore:
(a)defines the reportable audit segment so as to include all fees for any statutory audit (i.e. not just companies) plus fees in respect of work that ‘fits naturally’ with the auditor’s statutory responsibilities - that is, work either required to be, or in practice tending to be, carried out by the auditor. Examples include preliminary announcements, regulatory reporting and so on; and
(b)requires that that overheads, as measured and recognised in the firm’s financial statements, should be allocated to the reportable segment. The impact of material non-recurring income and costs should also be disclosed, in order to highlight their effect on profitability.
Disclosure is allowed in either the firm’s Transparency Report or its Annual Report.
Launching the Voluntary Code, Working Group Chairman Andrew Vials commented:
‘We are very pleased to have been able to develop a principles-based Code. We believe that it will lead to improved transparency in reporting by audit firms, and enhanced comparability when considering the profitability of the statutory audit segment. At the same time it minimises prescriptive rules and unduly costly systems changes by firms.’
FRC Chief Executive Paul Boyle said:
‘I am grateful to the CCAB for producing guidance that fully meets the recommendation of the Market Participants Group, and encourage all major firms to adopt the new Code. If followed, the best practices set out in this Code should ensure clear and comparable reporting and will contribute to the efficiency and transparency of the audit market.’
The Voluntary Code is available for download here.
Media Enquiries:
Contact Simon Thompson on 020 7920 8515 or .
- ENDS -
Notes to Editors:
- CCAB comprises the six major accountancy bodies in the UK and Ireland:
The Institute of Chartered Accountants in England and Wales (ICAEW)
The Institute of Chartered Accountants of Scotland (ICAS)
The Institute of Chartered Accountants in Ireland (ICAI)
The Association of Chartered Certified Accountants (ACCA)
The Chartered Institute of Management Accountants (CIMA)
The Chartered Institute of Public Finance and Accountancy (CIPFA).
- CCAB provides a forum for co-ordinating views on a wide range of issues of interest to the accountancy profession as a whole.
CCAB Ltd Registered office at above address. Registered in England No.1839569.
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