The Financial Reporting Council (FRC) has published updated guidance for the audit of financial instruments, in response to concerns raised by investors about the depth and reliability of audits, following the financial crisis.

Nick Land, FRC board member and chairman of the audit and assurance council, said: 'This new update is intended to assist auditors in understanding the nature of, and risks associated with, financial instruments, the different valuation techniques and types of controls that may be used by entities in relation to them, and identifies the important audit considerations.'

The FRC previously issued updated guidance for auditors in 2009 and consulted on the updated guidance in October 2012. This final guidance, which is applicable to audits of entities of all sizes that may be subject to the risks associated with using financial instruments, is largely unchanged from the consultation.

The updated guidance is given in Practice Note 23, Special Considerations in Auditing Financial Instruments. It reflects the clarified International Standards on Auditing (ISAs) (UK and Ireland) and guidance issued by the International Auditing and Assurance Standards Board (IAASB) in its International Auditing Practice Note (IAPN) 1000.

The FRC says it has supplemented IAPN 1000 where it considers it necessary with further guidance that was set out in the preceding version of Practice Note 23 and is still relevant, and with a small amount of new guidance in relation to matters not covered in either IAPN 1000 or the preceding version of Practice Note 23. This additional guidance is clearly highlighted.