Annual review 2013 Highlights of faculty activity in 2013 BUSINESS WITH CONFIDENCE icaew.com/aaf
Chairman s report In addition, we have maintained our established package of member resources including the faculty magazine, Audit & Beyond, the monthly electronic bulletin, our nationwide roadshow, which visited 18 locations in 2013, and essential technical releases. The faculty also issued a special revised publication on group audits which has proved particularly popular with practitioners as it has a more accessible style and provides practical examples. 2013 saw the faculty leading the debate, leading innovation and leading change. As my term as chairman of the faculty draws to a close, I am satisfied that the faculty is in great shape to support the profession as it adapts to a changing and challenging audit market. The faculty s proactive approach to tackling the future of audit head on has placed the faculty at the heart of the debate and strengthened its position as an international opinion leader. Key initiatives such as the AuditFutures programme an exciting collaboration to drive industry change, the Audit Quality Forum unique in the world for providing an on-going independent forum where market participants can discuss audit quality, and the faculty s communications campaign to demystify audit and help rebuild trust and confidence in auditors and the services they provide, have all been invaluable to the profession. The faculty now has the essential foundations in place to take the profession forward and help shape a clear vision. I have been particularly impressed with the faculty s Audit Insights series, which bring together the insights and observations of auditors of businesses in specific sectors. Four reports were issued in 2013 in the areas of banking, manufacturing, cyber security and retail. These reports are quite exceptional and demonstrate the faculty s unique ability to convene specific expertise and bring their knowledge of a market sector to the public, capturing more of the audit value for the public benefit. I am pleased to see the faculty offering evolving to meet the changing needs of members with more webinars and online resources available. We introduced a series of webinars of our popular external audit lecture series which attracted more than 1500 registrations. We have revised the format of our AQF debates using well-known media personalities to facilitate the debates making them more engaging and accessible to a broader audience. It s been another busy year for the re:assurance initiative, with two major projects launched. The journey: assuring all of the annual report? sets out four scenarios for the future of assurance in this area, together with five challenging questions which will be addressed in follow-up milestone papers. The Assurance Options pack, launched at The SME Confidence Factor debate in October 2013, is a practical tool designed for ICAEW members to share with audit exempt organisations, helping them understand the options for adding credibility to their financial statements. Faculty membership has remained steady with 5,551 individual members and we are fortunate to have the support of 27 member firms through the corporate membership scheme. I am also pleased to report that faculty finances are in good health. Looking forward to 2014, I am in no doubt that it will be another busy year for the faculty as we represent the views of the profession in the ongoing UK and Europewide debate on the future of audit and assurance. We will endeavour to evolve our offering to meet the changing needs of members. I would also like to take the opportunity to express my sincere thanks to the faculty s growing number of volunteers (all listed at the end of this report) who contribute much time and effort to the faculty s direction and output and of course the faculty team, who make it all happen. In particular, I would like to highlight the efforts of Myles Thompson, who stood down as chair of TPAC and a member of the faculty committee in 2013. His contribution to the faculty over the years has been invaluable. Charles Bowman Chairman, ICAEW Audit and Assurance Faculty 2 Annual Review 2013
Highlights from 2013 COMMUNICATING THE VALUE OF AUDIT AND ASSURANCE A communications programme has been put in place to promote the value of audit and assurance to society and, as a consequence, start to rebuild trust and confidence in auditors and the services they provide. A poll of journalists has been conducted by an independent consultancy and a series of initiatives were started in 2012 to communicate the value of audit and assurance under the audit and assurance insights banners, Audit Quality Forum and AuditFutures programmes. REPUTATION AND INFLUENCE TECHNICAL EXCELLENCE The Audit Quality Forum met twice in 2013. Its first event provided a spotlight on audit committees. The publication, Reliability matters: Reliability and the central role of the auditor was published, along with a new prospectus setting out the AQF s new agenda on audited financial statements should be reliable. The focus on reliability and outcomes from the audit provides a unique platform on which to look at the broader issues around audit quality and to tackle big issues around the reliability of audited financial statements. The first debate under this agenda took place in October entitled Can audited financial statements be reliable? A forum to identify improvements. In partnership with the Finance Innovation Lab and the World Wildlife Fund, we have hosted two groundbreaking assemblies, which successfully convened and mobilised a diverse community of over 200 professionals from the accounting firms, academia, civil society, businesses, and investors. The programme is called AuditFutures and its goal is to inspire innovation in audit and to repurpose the profession as instrumental to rebuilding confidence in markets and institutions. We have begun a journey of open enquiry into the evolving role of the auditor in the 21st century, and will be developing further projects in this area in 2014. The Technical and Practical Auditing Committee (TPAC), chaired by David Chopping of Moore Stephens, has lead responsibility for the technical work of the faculty. It develops technical policy on behalf of ICAEW membership, promotes best practice and offers practical guidance on topical auditing and assurance related matters for firms of all sizes. In 2013, TPAC approved or contributed to ICAEW s response to nine consultations. The ISA Implementation sub-group continued to consider practitioner concerns as issues with clarified ISAs highlighted by post-implementation reviews become clearer. The sub-group considered papers for IAASB meetings and, in particular, the IAASB publication on audit quality and the auditor reporting project. We continue to urge that both the PCAOB and the FRC maintain the alignment of auditing standards with ISAs as issued by the IAASB. Material developed by the sub-group on group audits and the proportional application of ISAs was particularly well received. The PCAOB Panel met twice during the year to discuss proposals on the audit of related parties and auditor reporting proposals. Katharine Bagshaw met with PCAOB members and staff during the year and, once again, we are expecting a number of exposures during 2014. The Audit Quality working group met twice during the year and its activities included the response to the IAASB consultation on its proposed Audit Quality Framework. It also led a Practical Auditing Discussion Group event on the same topic and held two webinars to provide members with practical support on common quality control challenges for firms. The Assurance Panel (TAP) has continued to collect and publish real life examples of assurance engagements, and these have proved invaluable in illustrating two major projects: publishing The journey: assuring all of the annual report? and providing and promoting guidance on assurance for unaudited small businesses in the form of a new technical release and a series of associated materials. Over 2014 we expect both these initiatives to gather steam, as the assurance review project goes international and a series of follow up reports accompanies The journey. The Practical Auditing Discussion Group (PADG) aimed at larger (top 50) firms met to consider topics such as: Achieving effective use of internal audit and specialist or expert why does it matter? Annual Review 2013 3
Representations ICAEW REP 27/13 Analysis of the main potential changes in auditing standards arising from the exposure draft of ISA 720 (revised) ICAEW REP 44/13 International Standard on Auditing (ISA) 720 (Revised) ICAEW REP 57/13 Consultation on prohibiting the use of internal auditors to provide direct assistance ICAEW REP 71/13 Revision to ISA (UK and Ireland) 700 Requiring the auditor s report to address risks of material misstatement, materiality and a summary of the audit scope ICAEW REP 73/13 A framework for audit quality ICAEW REP 92/13 Re-proposed auditing standard-related parties ICAEW REP 163/13 Reporting on Audited Financial Statements: Proposed New and Revised International Standards on Auditing (ISAs) to FRC ICAEW REP 165/13 Reporting on Audited Financial Statements: Proposed New and Revised ISAs to IAASB ICAEW REP 172/13 PCAOB Proposes a New Auditing Standard to Enhance the Auditor s Reporting Model and New Related Auditing Standard on the Auditor s Responsibilities for Other Information in an Annual Report MEMBER SERVICES Membership Individual faculty membership in 2013 was 5,551 (5,817 in 2012) and the faculty also had the support of 27 member firms through the corporate membership scheme. RESOURCES Events and webinars The faculty s Practitioner Services Committee organised one roadshow in 2013 The thinking auditor. John Selwood looked at areas where auditors need to ensure that audit quality is maintained and professional scepticism is demonstrated. Using practical examples to highlight the level of audit evidence that auditors should be aiming to achieve, it visited 18 venues nationwide and attracted 1,134 delegates. Each session was rated over 4 out of 5 by delegates for quality. The External Audit Lecture Series covered the following topics: The audit of related parties in charities and owner managed companies Speakers: Robert Holland & Alex Peal, James Cowper The audit of accounting estimates in smaller entities Speaker: Philip Lenton, Deloitte Mastering audit documentation Speaker: David Gallagher, MHA MacIntyre Hudson Group audits: getting them right first time Speakers: Richard Gillin, Deloitte and Hugh Morgan, Baker Tilly New for 2013, the above lecture programme was rolled out as series of webinars which proved extremely popular, attracting 1,561 registrations. In addition, the faculty also provided the following webinars: Subsidiary company audit exemption Speaker: John Selwood ISQC1: making it work for you Speakers: Peter Upton, Sole Practitioner and Stelios Saphiris, PwC Cyprus Revisiting the efficient and effective auditing of smaller entities Speaker: John Selwood Audit exemption: what now? Speakers: Michelle Fisher, Sobell Rhodes and Catherine Willshire, Price Bailey Monitoring your firm s audit quality Speakers: Gill Spaul, Moore Stephens and Peter Upton, Sole Practitioner These webinars attracted a further 1,647 registrations. 4 Annual Review 2013
Publications The faculty published Technical Release TECH09/13AAF Assurance review engagements on historical financial statements. The long-awaited revised faculty publication on group audits was published in late 2013 with input from a group of practitioners from firms of all sizes. The more informal style of this publication has enabled practitioners to articulate more clearly the real practical problems associated with group audits, and more importantly, the way in which they deal with them on a day-to-day basis. INTERNATIONAL REACH The Chair of the Practice Committee, Peter Hollis, and Katharine Bagshaw, a member of IFAC s Small and Medium Practitioner Committee (SMPC), attended an intensive series of meetings with, and made presentations to, ICAEW members, local practitioners, professional and regional bodies and regulators around the margins of IFAC s annual SMPC forum in Kampala. The faculty lead symposia on audit reform at the European Accounting Association conference in Slovenia and the American Accounting Association conference in Washington DC in 2012. In November faculty staff spoke at an event on assurance in Warsaw for the Polish Chamber of Auditors. AuditFutures has an international membership and audience and will continue to expand globally in 2013. Work on assurance review engagements attracted international attention in 2013, with close consultation with IFAC, and a webinar accessed from around the world. A joint ICAEW/FEE event is planned for February 2014, and further opportunities to share ICAEW expertise internationally are expected to arise. Chris Cantwell delivered roadshow presentations in Cyprus in December to more than 300 people on current challenges for auditors, allowing us to engage with the local membership base and build on our formal cooperation with the Institute of Certified Public Accountants in Cyprus (ICPAC). A meeting of technical partners was held jointly with the ICPAC Auditing Standards Committee and Chris also spoke at a panel event hosted by the Institute of Internal Auditors Cyprus on the collaboration between internal and external auditors. Finally, an event was held at European University Cyprus for university and ICAEW students on the role of audit in society and how it might change around the AuditFutures initiative. issue 181 july/august 2013 icaew.com/aaf Audit & be yond The cinderella of The audit profession is coming of age Page 3 THE JOURNEY: ASSURING ALL OF THE ANNUAL REPORT? AUDIT INSIGHTS ReTAIl Flying high The pursuit of audit quality Inquiring minds Technical questions answered by the advisory service Going for gold practitioners views on the merits of isqc 1 Clearing up conundrums Q&as on audit exemptions and overseas property RE: AssURANCE INITIATIVE BEYoNd THE CURVE BUsINEss WITH CoNfIdENCE icaew.com/assurance BUSINESS WITH confidence icaew.com/auditinsights Page footer C Annual Review 2013 5
Financial statement Year ended 31 December 2013 2013 000 2012 000 Income Faculty subscriptions 973 907 Interest on funds held 18 17 Miscellaneous income 0 1 Total income 991 925 Charles Bowman Chairman ICAEW Audit and Assurance Faculty 6 Annual Review 2013
Committee and other group membership (As at 31 December 2013) FACULTY COMMITTEE Charles Bowman, PwC (Chair) Stella Fearnley, Bournemouth University David Gratton, Duncan & Toplis David Herbinet, Mazars LLP Sandra Higgins, Sole practitioner Robert Holland, James Cowper Philip Johnson, FEE Shireen Khattak, Practitioner Stephen Maslin, Grant Thornton James Roberts, BDO Myles Thompson, KPMG William Touche, Deloitte Peter Upton, Sole practitioner Richard Wilson, Ernst & Young TECHNICAL AND PRACTICAL AUDITING COMMITTEE David Chopping, Moore Stephens (Chair) David Isherwood, BDO (Vice-Chair) Ian Connon, BDO David Gallagher, MacIntyre Hudson Richard Gillin, Deloitte Andrew Goldsworthy, Mazars Jon Gray, KPMG Andrew Güntert, Mercia Robert Holland, James Cowper Josephine Jackson, Grant Thornton Sarah Lyon, Ernst & Young Janice Matthews, Menzies Dominic Staniforth, Barber Harrison & Platt Geoffrey Swales, PwC PCAOB PANEL Julian Thomas, Deloitte (Chair) Ismail Bhayat, BP Louis Cooper, Horwarth International James Goodwin, Smith & Nephew David Herbinet, Mazars Iain Henderson, BDO Bob Landwehr, Ernst & Young Ian Parker, KPMG John Patterson, PwC Peter Rowley, Grant Thornton Samantha Russell, Mazars Myles Thompson, KPMG Nicola Warburton, Baker Tilly ISA IMPLEMENTATION SUB-GROUP Hugh Morgan, Baker Tilly (Chair) Sue Almond, ACCA Steven Cain, CIPFA John Capper, RSMI David Chopping, Moore Stephens Lesley Clarke, ICAEW Ian Connon, PKF Martin Crane, KPMG Jack Easton, UHY David Gallagher, MacIntyre Hudson Richard Gillin, Deloitte Emma Huxley, NAO David Isherwood, BDO Christine Johnson, Audit & Compliance Solutions Axel Kunellis, KPMG Aidan Lambe, ICAI Philip Lenton, Deloitte Mark Pullen, RSMI Edward Rands, Cooper Parry Michelle Rose, BDO Jonathan Rowden, PwC Mark Shaw, PwC Gillian Spaul, Moore Stephens SPECIAL REPORTS OF ACCOUNTANTS PANEL Andy Harris, Deloitte (Chair) Kate Acott, Grant Thornton Steve Andrews, BDO Helen Brennan, KPMG Adrian Byrne, PwC Sam Ede, Carpenter Box Kim Hurst, Mazars Josephine Jackson, Grant Thornton Philip Lenton, Deloitte Sarah Lyon, Ernst & Young Alex Peal, James Cowper Jane Sawyer, KPMG PRACTITIONER SERVICES COMMITTEE Sandra Higgins, 1234 Accountancy Ltd (Chair) Stuart Chapman, Lakin Clark Ltd Bee Lean Chew, Wilder Coe LLP John Moss, Royce Peeling Green Ltd Paul Rayner, Sole practitioner John Selwood, Revolution Solutions Alan Sidebottom, Garbutt & Elliott Ltd Peter Upton, Sole practitioner Catherine Willshire, Price Bailey LLP THE ASSURANCE PANEL James Roberts, BDO (Chair) Charles Bowman, PwC Simon Chard, PwC Simon Figgis, KPMG Richard Gillin, Deloitte Andrew Riley, Assure UK Christopher Stephen-Haynes, Bloomer Heaven John Ward, Sole practitioner AUDIT QUALITY WORKING GROUP Gill Spaul, Moore Stephens Europe (Chair) Shariq Barmaky (Deloitte & South East Asia region) Tony Fox (Grant Thornton), Andrew Güntert (Mercia) Nicole Kissun (BDO) Alden Leung (EY & Greater China region) Alex Peal (James Cowper) Petros Petrakis (PwC & Europe region) Geoff Swales (PwC) Myles Thompson (KPMG) Peter Upton (sole practitioner) Annual Review 2013 7
ICAEW is a world leading professional membership organisation that promotes, develops and supports over 142,000 chartered accountants worldwide. We provide qualifications and professional development, share our knowledge, insight and technical expertise, and protect the quality and integrity of the accountancy and finance profession. As leaders in accountancy, finance and business our members have the knowledge, skills and commitment to maintain the highest professional standards and integrity. Together we contribute to the success of individuals, organisations, communities and economies around the world. Because of us, people can do business with confidence. ICAEW is a founder member of Chartered Accountants Worldwide and the Global Accounting Alliance. www.charteredaccountantsworldwide.com www.globalaccountingalliance.com ICAEW Chartered Accountants Hall Moorgate Place London EC2R 6EA UK T +44 (0)20 7920 8493 E tdaf@icaew.com icaew.com/aaf linkedin.com find icaew twitter.com facebook.com/icaew ICAEW 2014 TECPLN12964 05/14