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The Impact of Brexit on EU Audit Reform

Posted on 8/07/2016 by Conor Chadwick

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As the reality of the Brexit vote is settling in, business are calculating ramifications and planning for the coming years. With one of the biggest questions accountants are wondering is “What happens to all the EU audit reform and how will future audits be affected?”

Gilly Lord, head of audit strategy and transformation at PwC, isn’t expecting any drastic changes to happen in the time being, believing that in many ways “it’s business as usual in the world of audit”. Going on to explain that the “implementation of UK legislation is in place, and the FRC’s Ethical Standard came into force on the 17 June. The FRC has already confirmed that the UK regulatory framework is unchanged.” She did later explain however, that there are four key things that auditors will need to account for:

  • Foreign exchange rate volatility and potential impact on financial statements
  • Potential impact on asset valuations, and on valuation of pension deficits (real estate could be a sector particularly affected)
  • Whether changes are needed to principal risk disclosure
  • Whether going concern assessments and viability statement reviews need to be updated

Mrs Lord went on to explain that although the long term is less clear, it is likely that “the UK will continue to apply much of the EU regime”, despite the possibility that “the UK regulatory framework could change.

Summing up the impact of the Brexit result for business as a whole, Mrs Lord said that “a significant divide remains between big business and the general public” and that the vote to leave should be a “catalyst for business to renew its efforts to engage with the public and restore trust” by trying to “communicate more clearly with a wider range of stakeholders.