A Statutory Auditor is a person who has the requisite approval to conduct audit of consolidated accounts or annual accounts. A firm that has the necessary approval to conduct statutory edits is called the Audit Firm.

Statutory Auditors and Auditing Annual Accounts in UK

Last few years have been witness to heightened level of activity when it comes to statutory auditing in the EU and the UK. There have been a number of regulatory changes that has taken place in statuary audit market. These changes taking place for the last few years has made it compulsory on the part of large corporations to take into consideration different set of rules while taking decisions pertaining to audit appointment.

Financial Reporting Council’s (“FRC”) Rules

The rules derived from: the Financial Reporting Council’s (“FRC”) UK Corporate Governance Code (April 2016); the Competition and Markets Authority 2014 Order; and the EU Statutory Audit Directive and Regulation which were implemented in the UK on 17 June 2016 by various new rules including the Statutory Auditors and Third Country Auditors Regulations 2016 and the FRC’s Revised Ethical Standard (June 2016). Needless to say it’s pretty complicated and demands appropriate understanding by corporations in order to conduct audit as per the new requirements. A noticeable aspect of the new rules and regulation is that since it came into effect, it will be necessary for all public interest entities in the United Kingdom to rotate their statuary auditor every 20 years and issue a tender every ten year.

Also, the FRC’s Revised Ethical Standard (June 2016) has laid out new guidelines placing restrictions upon providing non-audit services to UK public interest entities audit clients. The new restrictions brought in by FRC’s Revised Ethical Standard are applicable to audits of financial years beginning on or after 17 June 2016. What these restrictions means is that it places restrictions on an auditor of a UK public interest entity from offering certain non-audit services UK public interest entities audit clients.

Also, the new set of rules limit on the fees earned by offering non-audit services. Experts opine that they have no reason to believe that the decision by the UK to leave EU or Brexit as it is called will have no effect on application of the EU rules in the UK, at least in near foreseeable future. Also, it is believed in the longer run that there is not going to be much changes taking place in the UK as it will continue to implement EU audit laws to ensure that it has access to lucrative EU market.

SATCAR 2016(Statutory Auditor and Third Country Auditors Regulations 2016)

Under SATCAR 2016(Statutory Auditor and Third Country Auditors Regulations 2016), the Financial Reporting Council (FRC) is designated as the competent authority which is entrusted with the task of performance and oversight of the audit regulation tasks mandated by EU Regulation 537/2014 and EU Directive 2006/43/EU as amended and as implemented by SATCAR 2016.

The competent authority (FRC in this case) is responsible for establishing criteria that determines whether a person is eligible to be a statuary editor not.


The eligibility criteria that determines whether a person possesses all the requisite expertise, qualifications and knowledge to be a statuary editor came into force on 17June, 2016.


With respect to the eligibility criteria, following points need to be taken into account:

“EEA auditor” means a person possessing qualification to carry out the role of an auditor under the law of an EEA member state other than the UK and


‘EEA Audit Firm’ means a firm that is eligible under the law of an EEA member state to appoint a statuary auditor.

‘Registered Auditor’ means a firm which has been registered in the register of auditors and which has the qualification to be appointed as a statuary editor.

‘Registration Committee’ means a committee constitute by RSB and entrusted with the tasks and responsibilities of carrying out registration functions.

Eligibility criteria

A firm not registered with RSB or the Competent Authority cannot accept an audit appointment

A firm is recognized by RSB to be a statuary audit firm only if has been recommended by the Registration Committee which needs to be convinced that it fulfills all eligibility criteria.

In case the firm is a sole practice and not an EEA audit firm, the firm can get itself registered as a competent statuary audit firm given:

The firm is fit and possess all the qualification to be appointed as a statuary audit firm. The Registration Committee before deciding that the firm is ‘fit and proper’ must be assured that the firm possess all the requisite rules, guidelines, eligibility criteria, etc as laid down from time to time by the Competent Authority and RSB.

The firm must comply with the PII regulations of the Registration RSB and the Competent Authority.

The sole practitioner should be a responsible individual and should be a member of either ICAS, ICAI, ICAEW or a member of the association of Chartered Certified Accountants.

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