The BEIS direction provides offical confirmation of the delegation of audit regulatory tasks sets out the legal framework for official oversight of audit, confirming the Financial Reporting Council (FRC) as the competent authority responsible for the public oversight of statutory auditors under the EU Regulation.

The FRC will be responsible for:

• the approval and registration of statutory auditors;
• technical standards and standards of professional ethics and internal quality control of statutory auditors and audit work;
• continuing education of statutory auditors;
• monitoring (by means of inspections) of statutory auditors and audit work;
• investigation of statutory auditors and audit work; and
• imposing and enforcing sanctions.

Regulation 3 enables the FRC to delegate tasks to any Recognised Supervisory Body (RSB), to take on responsibility for oversight. The RSBs are:

• Association of Authorised Public Accountants (AAPA);
• Association of Chartered Certified Accountants (ACCA);
• Institute of Chartered Accountants in England and Wales (ICAEW); and
• Institute of Chartered Accountants of Scotland (ICAS).

The guidance states that ‘the government intends that the Financial Reporting Council (the FRC)  should be the UK competent authority for the regulation of auditors, but that legislation will require it to delegate regulatory tasks so far as is possible to recognised supervisory bodies that meet criteria set out in the legislation.

‘Overall this would mean that the FRC would only have to conduct audit inspections, investigations and disciplinary cases in relation to public interest entities and would oversee the work of recognised supervisory bodies for other audits’.

Under the new framework, as currently, the FRC would also have the ability to take over any particular inspection or investigation if it deemed it to be in the public interest.

The ARD came into force in the UK on 17 June 2016, although the government only released the supervisory guidance on 5 August.

The rules are set out under regulation 3 of the Statutory Auditors and Third Country Auditors Regulations 2016 to Supervisory Bodies Recognised by the FRC under section 1217 of the Companies Act 2006.

Under the ARD, the FRC will no longer be responsible for Ireland as a jurisdiction. From 17 June, the Irish Auditing and Accounting Supervisory Authority (IAASA) will be in charge of audits out of the Republic of Ireland, as the competent authority and will also issue auditing standards in the country.

The BEIS Direction on delegation of audit regulatory tasks is available here https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/543790/beis-16-4-ministerial-direction-on-delegation-of-audit-regulatory-tasks.pdf