Changes to UK independence standards: Impact on Canadian companies
INSIGHT ARTICLE |
Authored by RSM Canada
In an effort to improve auditor independence, the Financial Reporting Council, the United Kingdom’s audit regulator, announced new independence standards, which commenced in March 2020. These changes now prohibit audit firms from providing non-assurance services (e.g., advisory, tax compliance, etc.) to their audit clients. For U.K. companies with offices and subsidiaries located in a Canadian jurisdiction, these new ethical standards may necessitate some changes in service providers.
What is the regulation?
The U.K. audit independence rules are the result of concerns that U.K. (and European Union) regulators expressed around ethics and independence. Regulatory bodies increasingly worry that audit firms are potentially losing their independence from audit clients due to lucrative fees earned from providing non-assurance services.
The impetus in the U.K. is the public and political uproar following some notable corporate failures in recent years, including Thomas Cook in 2019, wherein over 150,000 British travellers were left stranded around the world after the vacation company declared bankruptcy.
What does this mean for your business?
For U.K. firms with offices and subsidiaries in Canada, the changes essentially mean that the service provider that performs the audit services can perform only audit services. All other accounting and consulting needs such as advisory and tax compliance must be performed by a different firm. Depending on the company’s individual situation, this may require a change of service provider in Canada.
How we can help
There continues to be an evolution of the regulatory environment in the U.K., and these changes could be highly disruptive to your business. However, RSM offers a wide range of services in addition to audit, including non-compliance tax services, actuarial support, digital transformation and M&A advisory. Through a breadth of resources in Canada and the United States, as well as a global focus on the middle market, RSM is well positioned to help your business through this transition and beyond.
Next steps
The new requirements have been in place since March 2020, so it is in the best interest of your company to act as soon as possible if you have a potential conflict. Contact us to learn more about how we can help support your tax and consulting needs.
Let's Talk!
Call us at 905.415.2511 (Markham) or 705.727.0763 (Barrie) or fill out the form below and we'll contact you to discuss your specific situation.
This article was written by Stan Zinman, Tim Nakai and originally appeared on 2021-02-10 RSM Canada, and is available online at https://rsmcanada.com/what-we-do/services/tax/international-tax/changes-to-uk-independence-standards-impact-on-canadian-companies.html.
The information contained herein is general in nature and based on authorities that are subject to change. RSM Canada guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM Canada assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.
RSM Canada Alliance provides its members with access to resources of RSM Canada Operations ULC, RSM Canada LLP and certain of their affiliates (“RSM Canada”). RSM Canada Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM Canada. RSM Canada LLP is the Canadian member firm of RSM International, a global network of independent audit, tax and consulting firms. Members of RSM Canada Alliance have access to RSM International resources through RSM Canada but are not member firms of RSM International. Visit rsmcanada.com/aboutus for more information regarding RSM Canada and RSM International. The RSM trademark is used under license by RSM Canada. RSM Canada Alliance products and services are proprietary to RSM Canada.
NVS is a proud member of the RSM Canada Alliance, a premier affiliation of independent accounting and consulting firms across North America. RSM Canada Alliance provides our firm with access to resources of RSM, the leading provider of audit, tax and consulting services focused on the middle market. RSM Canada LLP is a licensed CPA firm and the Canadian member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM Canada Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.
For more information on how NVS can assist you, please call us at 905.415.2511 (Markham) or 705.727.0763 (Barrie).
