By Paul Cummins FCCA AITI MSc.Multimedia Systems 14 January 2005

Financial Reporting Council ( UK) Strategy for 2005 for Auditing

The Financial Reporting Council (FRC) is a unified, independent regulator.  Its aim is to promote confidence in corporate reporting and governance. 

The Financial Reporting Council (FRC), the UK 's unified, independent regulator for corporate reporting and governance, published its Regulatory Strategy and its Plan & Budget for 2005/06, on 21 December 2004. As part of that its particular strategy on improvingAuditing is set out below:

Objective 2 - Promote high quality auditing

a) Contributing to the development and implementation of ISAs

• Work with the IAASB, with other national standard setters and EU institutions to develop
high quality ISAs. IAASB projects of particular importance will be those to improve existing
standards on group audits, materiality, accounting estimates and related parties.

b) Making progress on the convergence of UK auditing standards with ISAs

• Revise UK and Irish audit opinions in the light of revisions to the international standard on
audit reports and update existing Practice Notes and Bulletins.

c) Improving other aspects of UK auditing standards and guidance

• Issue a Bulletin to provide illustrative audit opinions (including references to IFRS).
• Update other Bulletins to reflect changes in regulatory requirements and changes to the
Listing Rules.
• Issue guidance in relation to auditors' responsibilities relating to the OFR.
• Finalise the Bulletin 'Directors' compliance statements: Reports by auditors under company
law in the Republic of Ireland'.

d) Improving ethical standards for auditors in the UK

• Monitor the implementation and impact of APB Ethical Standards for Auditors and provide
additional guidance if needed.
• Contribute to the work of IFAC in the revision of its Code of Ethics.

e) Undertaking specific statutory duties of regulation in relation to auditing and the
supervision of the auditing profession by the recognised supervisory and qualifying
bodies

• Update documentation of the regulatory processes of RSBs and RQBs and monitor
compliance.
• Establish RSBs' compliance with the new requirements of the C(AICE) Act 2004.
• Evaluate existing regulations on information available to the public about auditors under Part 2
of Schedules 11 and 12 of the Companies Act 1989 and the potential need to replace this with
regulations made under POBA's delegated powers to comply with new disclosure
requirements in the revised 8th Company Law Directive.

• Evaluate applications to become RSBs and RQBs and applications for approval of overseas
audit qualifications under Section 33 of the Companies Act 1989.
• Consider (with DTI) the development of audit quality and sanctions for poor quality audits.

f) Monitoring the quality of the auditing function in relation to listed companies and any
other entity in whose financial condition there is a major public interest

• Another major decision resulting from the Government's review of the regulatory regime for
the accountancy profession was the creation of a new audit inspection unit to take over from
the professional bodies the responsibility for monitoring the audit of those entities whose
activities have the greatest potential to adversely affect financial and economic stability. The
new unit will examine the quality of auditing across a wide range of companies and other
entities, with a corresponding increase in resources. In 2004/05 we started our monitoring
work by looking at the Big 4 audit firms and their audits of FTSE 350 companies.
• In 2005/06 we will extend our coverage beyond the Big 4 to the next tier of firms (the "Mid 5")
who audit a significant number of listed or major public interest entities. The intention is that
all the Mid 5 will be subject to a full review in 2005/06.
• Review all audits of the FTSE 350 audited by firms outside the Big 4 and Mid 5. There are
currently 4 such audits, 2 of which are investment trusts.
• Work with the professional accountancy bodies to ensure that the regulatory framework to
enable our inspections to be carried out is satisfactory and develop a framework for reporting
to the ARCs and ensuring they take appropriate action on our reports.
• Work with the professional accountancy bodies to develop an annual return process to
capture all the audits of interest to the AIU.

g) Contributing to UK Government input on proposed EU legislation and policies on audit;
and working with Government to implement them.

• Contribute to the finalisation of the 8th Directive and commence preparations for its
implementation in the UK.
• Encourage the adoption of ISAs in the EU.
h) Promoting increased cooperation among international independent audit regulatory
authorities
• Develop an approach to the review of international audits, develop working practices with
PCAOB and other overseas regulators, and share inspection best practice internationally.
• Promote coordination of the regulation of audit and the oversight of the auditing profession
in the EU.
• Promote arrangements for international cooperation and coordination between independent
audit regulatory authorities.
• Develop and implement (with DTI) a strategy for anticipating and responding to overseas
audit regulation with a UK impact.

There are many graphics on the website http://www.metaphorbusinessgraphics.com in the Financial Reporting section,dealing with recent regulatory reporting developments.