The Financial Reporting Council (FRC) has issued revised International Standards of Auditing, ISA (UK) 800 and ISA (UK) 805 covering financial statements for the insurance sector
In line with the original consultation paper, FRC has adopted the two ISAs with no adaptations specifically for the UK market. The revised ISAs have been adopted in response to the Prudential Regulation Authority’s (PRA) proposed requirement for mandatory external audit of elements of Solvency II public reporting in the insurance sector.
This ISA (UK) is written in the context of a complete set of financial statements prepared in accordance with a special purpose framework. ISA (UK) 805 (Revised) deals with special considerations relevant to an audit of a single financial statement or of a specific element, account or item of a financial statement.
In the UK, the auditor specifically describes the financial reporting framework as a special purpose framework in the auditor’s report. The auditor must also specifically states that the audit has been carried out in accordance with ISAs (UK), including ISA (UK) 800 and/or ISA (UK) 805.
The examples set out in the ISA (UK) 800 (Revised) appendix have not been updated or tailored to specific UK requirements.
Where ISA (UK) 805 (Revised) is adopted early for the audit of Solvency II Regulatory Returns for periods commencing prior to 1 January 2017 it may be used in conjunction with ISAs (UK and Ireland) where the audit of the statutory financial statements for the same period was conducted in accordance with ISAs (UK and Ireland).
Both the revised ISA 800 and 805 (UK) are effective for audits of financial statements for periods commencing on or after 1 January 2017. Early adoption is permitted.
Implementation of the revised ISAs will require additional work on the part of auditors, with some commensurate costs of producing an audit opinion on regulatory returns, as set out by the PRA.
ISA (UK) 800 (Revised) Special Considerations – Audits of Financial Statements Prepared In Accordance With Special Purpose Frameworks is available here