Essential Corporate News - Week ending 20 October 2023

DBT: Smarter regulation and the regulatory landscape – Call for evidence overview Smarter regulation and the regulatory landscape: call for evidence overview

On 17 October 2023 the Department for Business and Trade (DBT) published a Call for Evidence to inform its smarter regulation programme of regulatory reform, aimed at improving outcomes for businesses and consumers. This follows publication in May 2023 of Smarter regulation to grow the economy, an introductory report which set out the Government’s vision for regulation and committed to a series of regulatory reform announcements across the year to benefit businesses and drive innovation and growth.

The DBT are particularly interested in success stories and areas for improvement on regulatory agility, proportionality, and consistency of approach. They are also interested to understand any further steps that can be taken to reform the existing stock of regulation on the UK statute book.

Responses are requested from all stakeholders (businesses, consumers, regulators and other bodies) but the DBT are particularly interested in responses from small businesses and consumers. While responses from all stakeholders across all sectors in the economy are requested, it is noted that the DBT are not seeking views on financial services regulators and regulations which are dealt with by HM Treasury.

The Call for Evidence is structured as follows:

• Section 1: Preliminary questions, asks for some high-level views on the regulatory landscape.
• Section 2: Complexity and Ease of Understanding the Regulatory System, asks questions on how easy it is to navigate the landscape of regulators and understand what their objectives are.
• Section 3: Regulator Agility, Responsiveness and Skills, covers the speed with which regulators make decisions and whether they have the right balance of skills to deliver effectively.
• Section 4: Proportionality in Implementing Regulation, is concerned with whether the approach of regulatory authorities to delivering outcomes is proportionate.
• Section 5: Process and Governance, is concerned with whether the governance structures of regulatory authorities are conducive to delivering the best outcomes and whether the rationale for decisions is well communicated.
• Section 6: Regulator Performance, asks for views on whether regulators are delivering on their objectives and whether there is sufficient performance monitoring in place.
• Section 7: Concluding questions, asks some general closing questions on regulation as a whole, including whether there are international examples of best practice that regulatory authorities could adopt.
• Section 8: Closing Questions, asks some background questions on the respondent, including the capacity in which they are responding to this Call for Evidence.

The closing date for responses is 7 January 2024.

(DBT, Smarter regulation and the regulatory landscape: Call for Evidence, 17.10.2023)

FRC: Consultation on strengthening auditor reporting requirements of breaches of laws and regulations - International Standard on Auditing (UK) 250

On 18 October 2023, the Financial Reporting Council (FRC) launched a consultation aimed at strengthening auditor requirements to detect and report material misstatements from non-compliance with laws and regulations and to clarify instances when auditors should report such breaches, and other significant matters, to the relevant regulators. The purpose of this is to enhance the useability and informativeness of the audit and provide greater assurance to users of financial statements that potential material misstatements have been properly assessed by the auditor.

The consultation concerns proposed revisions to both ISA (UK) 250 Section A and ISA (UK) 250 Section B. ISA (UK) 250 is titled “The Auditor's Responsibilities Relating to Laws and Regulations in an Audit of Financial Statements” and it was last revised in 2019. For both standards, the FRC is proposing an effective date for audits of financial statements for periods beginning on or after 15 December 2024.

Section A: Consideration of Laws and Regulations in an Audit of Financial Statements

Non-compliance with laws and regulations can result in potential fines, litigation or other consequences which could have a material effect on the audited entity. Auditors will be expected to obtain reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error, arising from non-compliance with laws and regulations.

The FRC acknowledges that auditor's responsibilities cannot be open-ended to the effect of identifying and determining compliance with all laws and regulations relating to the entity. To assist, a more robust risk assessment process will be introduced to help auditors identify those laws and regulations that have, or may potentially have, a material effect on the financial statements.

Section B: The Auditor’s Statutory Right and Duty to Report to Regulators of Public Interest Entities and Regulators of Other Entities in the Financial Sector

The changes to this Section of ISA (UK) 250 build on existing UK laws whereby auditors of public interest entities are expected to comply with statutory duties to report to regulators if significant matters relevant to the regulator, such as breaches in law or regulation, come to the auditor’s attention. The FRC is proposing to introduce a more principles-based approach so that information that is of such significance is reported to regulators even where law, regulation or relevant ethical requirements do not require it.

The consultation period closes on 12 January 2024.

(FRC, Proposed International Standard On Auditing (UK) 250 (Revised) Consideration of Laws and Regulations in an Audit of Financial Statements, 18.10.2023)

(FRC, FRC to strengthen auditor reporting requirements of breaches of laws and regulations, 18.10.2023)