Under the audit regulation and directive, most insurance undertakings have been designated as public interest entities, the audit of which is subject to direct oversight and regulation by the FRC as competent authority for audit. 

The revised PN20 includes guidance on the application of ISAs (UK) in the audit of insurance company statutory financial statements and insurers’ regulatory reports under Solvency II which the Prudential Regulatory Authority (PRA) requires are audited in accordance with international standards on auditing.

In addition, PN20 covers the application of ISAs to the audit of friendly societies. The FRC has withdrawn the separate practice note 24 on the audit of friendly societies which has been superseded by revised material in the revised PN 20.

The regulator says its guidance was developed in cooperation with the PRA to reflect the revised landscape of prudential regulation under Solvency II, and includes illustrative auditor’s reports for regulatory engagements. It also includes material to support auditors working in the Lloyd’s Market.

The revised PN 20 is available for immediate use. The FRC says practice notes are intended to assist practitioners to comply with the requirements of standards, by providing additional contextual material on the application of standards in particular circumstances or in specialised sectors.

Although not prescriptive, the FRC’s framework for developing standards, statements of practice, codes and guidance states that the use of practice notes should be considered within the scope of the FRC’s review and monitoring work, and that those entities to which they are applicable should apply them in full, or be able to clearly justify non-compliance.

Practice Note 20 (Revised) The audit of Insurers in the United Kingdom is here.