The implications of Brexit - provisional guidance for auditors
Brexit implications - provisional guidance for auditors
At the FRC Brexit stakeholder meeting on 7 November, BEIS has confirmed that the UK will apply the third country provisions for audit post-Brexit irrespective of whether there is a deal or not; this is now settled and not subject to further negotiation as part of the withdrawal agreement. BEIS has laid SIs on the basis of a no deal with a transition period to allow for orderly negotiation on adequacy / reciprocity under the third country provisions but it’s not clear whether the same will be the case in the EU 27; in the case of Ireland as you will see below, there is likely to be a cliff edge. As things stand, applications cannot be made for third country auditor status until the UK becomes a third country so a potential cliff edge on 29 March; the focus of this has primarily been in regard to listed entity auditors but this will impact on SMPs in the Irish / NI (UK) context.
ACCA’s recognition as a Recognised Accountancy Body should continue post-Brexit and this was again confirmed in the call with IAASA on 7 November but there remains a lack of clarity on some of the practicalities. For example, members / firms based in the UK with Irish audit registration will lose registration even if they had achieved the audit qualification meeting the Irish examination and experience requirements; the advice received by IAASA brings in a residency test which is not included in the EU directives / Irish Companies Act. Also IAASA was clear that the long standing UK / Irish mutual recognition of each jurisdictions’ audit qualification will end as UK will be a third country - it may be that the Irish government is taking this hard line as a result of pressure from the EU. FRC, on the other hand, is keen to retain the long standing arrangement that predates any EU requirements and was primarily based on a competence test, but acknowledges the risk that this may no longer be possible.
More generally both FRC and IAASA have asked that we alert our members of the worst case scenario – loss of authorisation and the need to apply as third country auditors (and associated aptitude test).
For audit firms, some planning will be necessary. For example opening a practice in Ireland seems a simple solution; however, IAASA has indicated that a 'letter box' practice in Dublin is unlikely to suffice. IAASA is drawing comparison to the financial services sector where firms relocating to Dublin actually have to have a permanent presence and to also locate senior management in that Dublin office. An alternative solution is to accelerate all audit sign off to pre March 2019 and hope that a pragmatic solution is reached by the politicians in time for the next audit. UK firms may also decide to link up with Irish resident audit firms; find a list of such ACCA firms.