- within Corporate/Commercial Law topic(s)
- with readers working within the Banking & Credit and Law Firm industries
- within Wealth Management, Employment and HR and Technology topic(s)
- with Inhouse Counsel
A Mythbuster published by the Financial Reporting Council aims to clarify auditors’ responsibilities in relation to new internal control disclosures in annual reports
The Financial Reporting Council (FRC) has published a “Mythbuster“ to clarify auditors’ responsibilities under the UK International Standards on Auditing (ISA (UK)) where an annual report includes disclosures relating to Provision 29 of the UK Corporate Governance Code 2024.
- Provision 29 of the Governance Code applies to financial years beginning on or after 1 January 2026 and requires the board to include in the annual report:
a description of how the board has monitored and reviewed the effectiveness of the company’s risk management and internal control framework; - a declaration on the effectiveness of the material controls as at the balance sheet date; and
- a description of any material controls which have not operated effectively as at the balance sheet date, the remedial action taken or proposed in relation to these controls and any action taken to address issues previously reported on.
For more details on Provision 29 of the Governance Code, see our snapshot here.
These new disclosures will not fall within the scope of the auditor’s opinion on the financial statements. Instead they form part of the “other information” included in an annual report which is addressed in ISA (UK) 720. The Mythbuster sets out Q&A on issues which may arise for auditors in the context of Provision 29 disclosures. These include:
- the relationship between material controls identified by the board for the purposes of Provision 29 and the controls which the auditor identifies for the audit of the financial statements; and
- what the auditor should do if it identifies a significant deficiency as part of the audit which relates to an area where there is a material control for the purposes of the Provision 29 disclosures.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
[View Source]
