This proposed guidance relates to the following rule(s) in the FCA Handbook
SUP 3.8 – Auditors – ‘auditors must cooperate with the FCA while carrying out their duties (3.8.2R)’.
This code also relates to guidance in SUP 3.8, in particular:
- To fulfil 3.8.2, an auditor should attend meetings with and provide information to the FCA (3.8.3G).
- Within legal constraints, the FCA may pass on relevant information to the auditor (3.8.9G, this guidance simply summarises the position under Part 23 of FSMA and regulations made under FSMA (S.I. 2001/2188)).
- An auditor has a statutory duty to report certain matters to the FCA (3.8.10G, this guidance simply summarises the position under FSMA (sections 342 and 343) and regulations made under FSMA (S.I. 2001/2587)).
This guidance is likely to be most relevant to regulated firms and their auditors.
Background to this consultation
As a result of the financial crisis, we recognised the need to engage more effectively with auditors. So our Supervisory Enhancement Programme put annual bilateral meetings in place between supervisors and external auditors of high impact firms. We then published DP10/3 – Enhancing the Auditor’s Contribution to Prudential Regulation (published jointly with the Financial Reporting Council (FRC)), which stated an objective to improve the quality and frequency of this engagement. We published our Code of Practice for the relationship between the external auditor and the supervisor in May 2011. This Code has been updated to reflect the changes in the statutory objectives of the FCA under the Financial Services Act 2012. A separate Code of Practice will be published by the Prudential Regulation Authority (PRA).
Summary of the key issues
The Code sets out principles to guide interactions between FCA supervisors and auditors. It recognises that sharing relevant information in a timely way is an essential part of an effective working relationship, and it indicates a minimum level of meetings that should take place for firms with the highest impact on the FCA’s objectives.
Cost benefit analysis
The changes to the Code of Practice for the relationship between the external auditor and the supervisor mainly align the Code with FCA’s statutory objectives, rather than significantly changing the nature of interactions with the auditors. The benefits are in line with those stated in the CBA and the changes should not result in additional costs to firms.
We want your views
Do you have any comments on the proposed guidance?
Please respond by: 16 April 2013 (4 weeks)
Please email your responses to: Fiona Raistrick
Or send your responses to:
Professional Services and Skilled Person Oversight
The Financial Conduct Authority
25 The North Colonnade
London E14 5HS
Telephone: 0207 066 3890