Audit reports - stop press

The purpose of the ‘Stop press’ section is to keep subscribers aware of important developments that have not yet been incorporated into the main text. Each item will give an indication of when it expected to be incorporated into the main text. When this occurs, the item will be removed from ‘Stop press’ and will be listed under ‘What’s Changed?’.

Brexit Regulations

On 26 March 2019, the UK Government enacted the International Accounting Standards and European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2019 (SI 2019/685). The regulation ensured that on the day that the UK leaves the EU, the International Accounting Standards enacted in the EU will automatically become the ‘UK-adopted’ standards. From this point the Secretary of State will have the power to adopt and amend new international standards into the UK. The regulations also permit the Secretary of State to delegate this responsibility to an appropriate independent body.

On 30 January 2019, the Government passed the Accounts and Reports (Amendment) (EU Exit) Regulations 2019 (SI 2019/145) and on 1 February it passed the Statutory Auditors and Third Country Auditors (Amendment) (EU Exit) Regulations 2019 (SI 2019/177). These amend the filing and audit exemptions for companies and LLPs ahead of the UK leaving the European Union. The legislation comes into effect on ‘Exit Day’.

The statutory instruments remove references to the European Economic Area (EEA) within the Companies Act, as well as other supporting regulations.

Among other things the regulations affect the ineligibility criteria for qualifying as a small entity, preparing and filing exemptions for dormant entities and the availability of an audit exemption for subsidiaries. The regulations also set out the process for the UK to adopt International Accounting Standards.

On the 23 October 2019, the Government passed the Statutory Auditors, Third Country Auditors and international Accounting Standards (Amendment)(EU Exit) Regulations 2019 (SI 2019/1392), which amends the Brexit Regulations which were issued earlier in the year.

Nearly all of the regulations released apply ‘immediately before exit day’, apart from the amendments made in reg. 3 which apply 21 days after the regulations are released.

The main change is made to the Statutory Auditors and Third Country Auditors (Amendment) (EU Exit) Regulations 2019 (SI 2019/177), reg. 4, which in turn amends the Companies Act 2006, s. 479A. Following the issue of SI 2019/1392, a subsidiary entity will only be able to take advantage of audit exemption if ‘its parent undertaking is established under the law of any part of the United Kingdom’. This means that subsidiaries will only be able to take the audit exemption, if they have a UK parent.

The product will be updated as required once these regulations come into force.