This covers issues such as the registration and recognition of UK and EEA auditors and the issue of new or amended international accounting standards (IAS).

A letter to auditors states that if a firm or auditor is approved to conduct audit work in the EEA based on a UK audit qualification, then they need to urgently contact the competent authority in the EEA state(s) where they are currently approved to find out whether UK qualifications will continue to be recognised on and after 30 March.

They will need to do this for each EEA state where they have an approval. There are different actions they might need to take depending on the requirements of the EEA State where they are approved to operate, and a list of competent authorities in each state is provided.

It could be that the EEA state where they are approved continues their approval, in which case no further action is required. Alternatively, the competent authority in the EEA state where they are currently approved will no longer recognise UK audit qualifications. If this is the case, then they will need to re-establish their eligibility to carry out statutory audit work in that EEA state.

In a situation where an approval decision is still likely to be under consideration by the competent authority on exit day, the letter advises firms to urgently contact the competent authority in the EEA state(s) where they have made the application in order to find out if the application can continue, or whether they need to re-apply and obtain the relevant qualification in that country.

Any application to be a statutory auditor made to the competent authority of an EEA state on or after 30 March will need to be made on the basis that a UK audit qualification and aptitude test will no longer be recognised as equivalent to an EEA audit qualification.

Anyone undertaking an audit of an EEA company where they expect to sign the audit report after exit day, is urged to check with the competent authority in the country where the company is incorporated to see whether they can continue to do so in accordance with local law for such audits in that EEA state.

If an audit firm carries out the audit of a non-EEA company (which after exit will include a UK incorporated company) that is listed on an EEA regulated market, then it will need to register as a third country auditor with the competent authority of that EEA state.

As regards ownership issues, audit firms are advised to check with the competent authority whether individuals with a UK qualification will continue to count towards those individuals eligible to be counted among the required majorities of qualified owners and managers of the firm. Where UK auditors are not eligible to be counted among the required majorities of qualified persons who own or manage an EEA audit firm, and the required majority of voting rights includes those held by UK auditors, a firm should urgently consider whether any restructuring is required if it is to continue to be an EEA audit firm.

Letter to accountants

The letter to accountants lays out the situation regarding IAS in the event of a no deal Brexit. For financial years straddling exit date, that is beginning on or before 29 March 2019 and ending after that date, the regulations made by government will ensure that these companies can continue to use EU-adopted IAS.

UK incorporated companies will be required to use ‘UK-adopted IAS’ for financial years beginning after the date of UK’s exit from the EU. New or amended IAS published by the IASB after 29 March 2019, and those already published but not yet endorsed by the EU at that date, will be assessed for adoption in the UK by the new endorsement body, expected to become operational during 2019. This will enable companies to continue to apply the latest version of IAS in their accounts.

UK incorporated parent companies with subsidiaries based in the EEA need to check the relevant reporting requirements in the EEA state where the subsidiary is based. This is because the corporate reporting requirements of the UK’s Companies Act will not be deemed automatically equivalent to the EU’s accounting directive so that UK reporting requirements (eg, UK GAAP) may no longer be considered equivalent to the reporting requirements of the EEA country where the subsidiary is registered.

Changes in the main relate to UK incorporated companies with parent companies incorporated in the EEA states. Such companies will lose certain exemptions from preparing and filing financial statements for financial years beginning after exit day. For example, this will mean that intermediate UK parent companies with an immediate EEA parent will no longer be exempt from producing group accounts. Those companies would be required to prepare and file group accounts with Companies House for financial years beginning after 29 March 2019.

Similarly, UK incorporated dormant companies with EEA parents will no longer be exempt from preparing individual accounts. Such dormant companies will need to prepare individual annual accounts and file these with Companies House for financial years beginning after exit day.

Letter to auditors on no deal Brexit is here.

Letter to accountants on no deal Brexit is here.

Report by Pat Sweet