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    Country by Country Financial Reporting and Auditing Framework

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    United Kingdom – Crowe Clark Whitehill LLP (prepared July 2013)


    Preparation of and Filing of Statutory Financial Statements


    Companies and Limited Liability Partnerships (LLPs) registered in England and Wales are required to prepare annual financial statements and file these at Companies House.


    Public limited companies (plcs) are required to file their financial statements at Companies House within 6 months* of the accounting reference date.


    Private limited companies and LLPs are required to file their financial statements at Companies House within 9 months* of the accounting reference date.


    * please note that listed companies or those required to file accounts with the Financial Conduct Authority may be required to prepare their audited financial statements more promptly even though they do not need to be filed at Companies House until the time period specified above.


    All  companies  and  LLPs  are  required  to  prepare  full  financial  statements.    However, certain small  and  medium  sized companies/LLPs have an option to file abbreviated financial statements only at Companies House.  Abbreviated financial statements provide for some reduced disclosure.


    Large and medium sized groups are required to prepare consolidated financial statements.  However, certain small groups can take advantage of the option to prepare entity only financial statements.


    Financial Reporting Framework


    Listed companies in the UK are normally required to prepare their financial statements in accordance with International Financial

    Reporting Standards (IFRS).

    All other companies/LLPs in the UK, subject to any other requirements which may be otherwise specified, have the option to prepare their financial statements in accordance with UK Generally Accepted Accounting Principles (UK GAAP) or IFRS.


    Subsidiary companies of listed companies have an option therefore to prepare their financial statements in accordance with UKGAAP or IFRS. From December 2012 year ends subsidiary companies also have the option to apply a reduced disclosure framework that uses the principles of IFRS for measurement of the financial statements but omits a number of the required disclosures of full IFRS.


    Some small companies preparing their financial statements under UK GAAP can take advantage of reduced disclosure by preparing their financial statements in accordance with the Financial Reporting Standard for Smaller Entities (FRSSE).


    LLPs in preparing their financial statements under UK GAAP will also have consideration to the Statement of Recommended

    Practice "Accounting by Limited Liability Partnerships" (LLP SORP).


    UK GAAP is in a process of transition with a complete new framework derived from IFRS for SME's issued in March 2013. This new framework is available for early adoption and will be compulsory for accounting periods ending on or after 31 December 2015.



    Audit requirements for Companies and LLPs registered in England and Wales


    In the UK the following companies/LLPs must have an audit even if they meet the rules (noted below) for not having one.  A

    company must have an audit if at any time in the financial year if it's been:

    • a public company (unless it's dormant)
    • a subsidiary company (unless it qualifies for an exception)
    • an authorised insurance company or carrying out insurance market activity
    • involved in banking or issuing e-money
    • a Markets in Financial Instruments Directive (MiFID) investment firm or an Undertakings for Collective Investment in Transferable Securities (UCITS) management company
    • a corporate body and it shares have been traded on a regulated market in a European state

    Audit Exemption

    Subject to the above, most small private limited companies/LLPs may not need an audit of their annual accounts - unless the company's articles of association say it must or enough shareholders ask for one.  Alternatively, there may be a requirement specified by other third parties for an audit (i.e. in a bank loan/overdraft agreement).


    For a small company/LLP with financial year ends on or after 1 October 2012 they may qualify for an audit exemption if the company/LLP meets two of the following for two consecutive years

    • has an annual turnover of no more than £6.5 million
    • has assets worth no more than £3.26 million
    • has 50 or fewer employees on average

    For a group company these limits must apply to the worldwide group, not only the UK group.

    For a subsidiary company/LLP with financial year ends on or after 1 October 2012, then regardless of size they may be exempt from audit if all of the following conditions are met

    • The parent entity is incorporated in the EEA
    • Included in audited consolidated accounts (which must be filed in the UK)
    • Parental guarantee covering all outstanding liabilities at the year end is received and filed

    Where advantage is taken not to have an audit there is a requirement to include an audit exemption statement on the balance sheet of the company/LLP financial statements.


    Audit appointment, rotation and joint audits


    Audit appointments in the UK are not normally for a fixed period.  An auditor can normally be appointed/removed at any time.  The UK does not currently have any rules relating to mandatory rotation of audit firms but there are guidelines within the ethical standards regarding partner rotation. Whilst not prohibited, joint audits are very rare in the UK.


    Auditing Standards


    Crowe Clark Whitehill, the UK member firm of Crowe Horwath International are required to undertake their audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors. International Standards

    on Auditing (UK and Ireland) are issued by the Auditing Practices Board and are consistent with the Clarity ISAs issued by the

    IAASB subject to some minor additional requirements relevant within the UK and Ireland.


    Ethical Framework


    Crowe Clark Whitehill LLP is bound by the Code of Ethics of the Institute of Chartered Accountants in England and Wales (ICAEW). This is based on the IFAC Code (IESBA) with additional commentary for the UK. It is also consistent with the Codes of Ethics of the Institute of Chartered Accountants of Scotland, the Institute of Chartered Accountants in Ireland, and the Association of Chartered Certified Accountants.


    Additionally, in respect of audit work, we are subject to the Ethical Standards issued by the Financial Reporting Council (FRC). These apply to all UK and Irish registered auditors. The Ethical Standards are generally consistent with, but different from and often more stringent than, the IFAC/IESBA Code.


    Audit Regulation


    Crowe Clark Whitehill LLP are subject to the following external and internal monitoring processes with regard to their audit practice.


    External monitoring

    The firm is subject to external review by the Audit Quality Review Team of the Professional Oversight Board because of the large number of public interest entities audited by the firm. In May 2012, the AIU's second public report on the firm was published covering its inspection carried out between 2010 and 2012. The report is available from the Financial Reporting Council's website.


    The Quality Assurance Directorate (QAD) of the ICAEW conducts annual inspections in respect of audit work not covered by the AIU. The QAD also conducts annual inspections as part of its Practice Assurance regime, the last of which was in the first quarter of 2012.


    Practice Assurance is the ICAEW's process of monitoring and improving quality standards in member firms across the UK and covers the non-regulated part of our business which includes tax and advisory services.


    Internal monitoring

    We have established annual monitoring procedures known as Quality Assurance Reviews (QAR), led by the QAR Partner and, run by the National Quality Assurance Director. The QARs are conducted under carefully defined procedures and address all our service lines and Practice Assurance, which is more than required by regulation.


    The QAR system is continuously evolving. In the last year we have changed the partner appraisal system in order to reflect the results of the QARs in a more explicit manner. Monitoring for audit work comprises regular file reviews of audit clients. The QAR Partner decides which RIs in the firm will be selected for a file to be reviewed as part of this annual process. Review teams include both technical people and practitioners to identify, disseminate and encourage good practice. The file reviews and office action plans are agreed with those concerned before the reports are collated into a national report and action plans.


    Transparency report


    Crowe Clark Whitehill LLP prepare an annual transparency report that is available on their website and covers: Foreword from their Chief Executive;  Legal structure and ownership; Network arrangements; Governance structure; Governance, Executive and Management teams; Global reach; Leadership; Internal quality control system; Risk management; Data protection and information security; Ethical requirements and independence; Engagement performance; Monitoring: External monitoring;  Monitoring: Internal monitoring; Maintaining competence; Human resources; Financial information; Remuneration of partners; Appendix: Major public interest entity clients; Their locations.


    Contact Us
    David Chitty - Audit
    London, United Kingdom
    +44 20.7842.7292

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