Overview

The rules for auditing UK companies operating solely in the UK will not change from 1 January 2021.

UK companies operating in European Economic Area (EEA) countries will need to meet regulations in those countries.

Recognition of UK audit qualifications in EEA countries

Your UK qualification may not continue to be recognised from 1 January 2021.

By now you should have checked with the relevant competent authority where you are registered to understand the status of your registration.

UK audit firms auditing EEA companies

You may not be able to sign an audit report for an EEA company from 1 January 2021.

By now you should have checked with the relevant competent authority where you are registered to understand the status of your registration.

Third country auditors of non-EEA firms listed on EEA regulated markets

To carry out these audits you should register with the competent authority of the EEA state where the market is based.

You should do this as soon as possible from 1 January 2021.

Businesses treated as public interest entities

Banks, building societies, insurers and issuers of securities that trade on UK regulated markets will be treated as public interest entities and must follow the Audit Regulation as ‘onshored’ in UK law from 1 January 2021.

Your business will no longer be treated as a public interest entity in the UK if it only issues securities that are admitted to trade on EEA regulated markets.

Auditing groups of companies

You do not need to do anything if you audit a group of companies across the EEA and the UK if your parent company is based in the UK.

Restrictions on subsidiary companies in the EEA

Check with the competent authority in the country where your subsidiary is incorporated if there are any restrictions that may apply from 1 January 2021 – for example, sharing information outside the EEA.

Blacklisted non-audit services

Non-audit services will be blacklisted for all overseas subsidiaries of UK public interest entities from 1 January 2021.

This means:

• non-audit services will be prohibited if provided by the auditor of a UK public interest entity
• firms in the same network as a UK auditor of a UK public interest entity will be prohibited from providing blacklisted services to non-EEA subsidiaries

Disclosure and Transparency Rules on Audit Committees

UK issuers of shares or debt securities that are only admitted to trading on EEA regulated markets will no longer be subject to the Disclosure and Transparency Rules issued by the Financial Conduct Authority (FCA) from 1 January 2021.

All other UK public interest entities will still be subject to the Disclosure and Transparency Rules issued by the FCA and relevant rules issued by the Prudential Regulation Authority (PRA).

Exemptions for subsidiaries

The exemptions in these rules will continue to apply to subsidiaries as long as the parent company is incorporated in the UK.

For subsidiaries that issue securities on UK regulated markets, the parent company can be subject to either the FCA or the PRA rules.

Banks or insurers that qualify for PRA exemptions only, must have a parent company that is subject to the PRA rules.

Ownership of UK audit firms

You can continue to include EEA auditors and firms in your UK firm’s required majorities of qualified owners and managers up to 1 January 2021.

From 1 January 2021, you can no longer include an EEA auditor or firm, unless they’re both:

• based in the Republic of Ireland
• registered with a UK Recognised Supervisory Body

Ownership of EEA audit firms

As a UK auditor or UK audit firm it is unlikely you will be allowed to continue in an EEA firm’s required majorities of qualified owners and managers from 1 January 2021. By now your firm should have checked with the relevant competent authority where you are registered to understand the status of your registration.