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UK companies “woefully unprepared” for audit rotation

4th April 2016 • Article by Julia Smith

UK companies “woefully unprepared” for audit rotation

Nearly 20% of UK companies are “woefully unprepared” for new EU audit regulatory changes, a study has found

A survey of FTSE 350 business leaders has revealed that the majority of businesses are still underprepared for the changes and face significant cost implications.

The reforms proposed by the European Parliament mean listed companies will have to tender their audit contract every 10 years and rotate their auditor every 20 years.

There is also a list of non-audit services that the external auditor will not be able to carry out. These reforms will come into force in the UK in June.

The survey found 19% of the 100 chief financial officers, tax directors and audit committee chairs surveyed did not know when their company needed to tender or rotate its audit, and 28% said they did not fully understand the restrictions on non-audit services.

It also found 58% of companies still do not have a full strategic plan in place.

Businesses said they worry about transition costs, the general disruption and the possible changes to accounting judgments. More than half (57%) expect the transition costs to be 10-20% of their annual audit fee, while 21% believe it could cost 20-50% of their audit fee.

 

Jessica Fino

– See more at: http://economia.icaew.com/news/april-2016/companies-not-ready-for-audit-rotation-changes#sthash.9I1kABPs.dpuf