New audit independence restrictions? Will you need to find new advisers?

  • Written By: Emily Spooner
  • Published: Tue, 03 Nov 2020 12:00 GMT

Recent changes to audit independence rules are forcing more businesses, particularly large private firms and listed companies, to use separate providers for audit and non-audit services, and often to find new providers for non-audit services.

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The Financial Reporting Council, (“FRC”), has recently made significant revisions to its UK Ethical Standard and Auditing Standards and also effectively extended the definition of Public Interest Entities (“PIEs”) to a create a new class of companies called ‘Other Entities of Public Interest’ (“OEPIs”). These revisions could impact the extent to which non-audit services (including tax services, transaction related advice and accounting support) can be provided by your auditor.

We are seeing many large businesses choosing to separate their audit and non-audit services, even where no restrictions exist. In our view, the clear direction of travel for larger businesses is that audit and non-audit services will continue to be separated to ensure a more independent and robust audit. The OEPI definition is also expected to be broadened to capture an increased number of businesses, and a government consultation on this is expected by the end of the year.

Which non-audit services are impacted?

At Smith & Williamson we regularly advise large listed and privately owned businesses whose auditors are conflicted, or there are perceived independence concerns.


Frequently asked questions

My auditor has been providing a service which is now prohibited – what should I do?

You should firstly speak to your auditor, and then consider alternative providers for the now restricted services.

At Smith & Williamson we would be delighted to have an initial discussion with you about the restrictions, and how we might be able to support you with non-audit services going forwards.

How do the audit independence changes apply to groups with a non-UK parent?

There should be no impact on the audit or provision of non-audit services to an overseas parent, subject to any similar rules locally.

The impact in the UK will depend on how the audit of your group is structured, and if you have the same auditor in the UK subsidiary as for your overseas parent. Depending on your business profile (size, quoted/unquoted status), different rule changes will apply and we would be happy to discuss your specific circumstances with you.

Are the OEPI size limits considered on a group basis?

The limits are looked at on a company-only basis, not a group-wide basis.

However, if your group meets, or is close to meeting, any of the thresholds for OEPI, you should consider whether to apply the principles of the new rules. We are seeing a number of businesses choosing to separate audit and non-audit services, where no restriction applies, due to perceived independence concerns, and best practice in the market.

Our business has a private-equity investor; are we a “private company” for the OEPI definition?


A business that has private-equity investment could fall within the definition of OEPI if it has more than 2,000 employees, or turnover of more than £200 million and gross assets of more than £2 billion. These limits do not include the private-equity house or its other investments – each entity would be looked at on an individual basis. There are also some specific rules for fund management entities included within a private equity or venture capital LP fund structure.


By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.

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Emily Spooner

Director, Business tax

Business tax

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