February 19th, 2019 by James Goudie KC

The Local Audit (England and Wales) (Amendment) (EU Exit) Regulations 2019 will enable EU qualified auditors currently auditing local public bodies to continue to work in the UK, for a transitional period, in the event of a “no deal”. The Regulations are pursuant to powers in Section 8 of the European Union (Withdrawal) Act 2018, and are subject to the negative resolution procedure. There are now 238 Withdrawal Act Statutory Instruments.

The local audit regime in the Local Audit and Accountability Act 2014 and relevant secondary legislation contains provisions setting out arrangements in relation to the qualifications and regulation of local auditors. These enable auditors practising in the European Economic Area (EEA) to register for local audit, mirroring arrangements in the Companies Act 2006, at that time, relating to the appointment of EEA and Third Country auditors to the statutory audit regime for UK companies. As a result of the UK’s threatened withdrawal from the EU, references to arrangements with the EU, its institutions and those of Member States, to EU institutions, EU law and concepts under EU law would no longer be workable in domestic legislation. These Regulations make amendments to both primary and secondary legislation to enable the continued operation of the local audit framework post any EU exit and maintain alignment with the statutory audit regime in this respect.

These Regulations are aimed to ensure that upon UK exit from the EU, the local audit regime would align as necessary with the approach being taken for the statutory audit regime (as amended by the Statutory Auditors and Third Country Auditors (Amendment) (EU Exit) Regulations 2019). They set out transitional arrangements enabling EEA auditors currently working in the local audit regime to apply to have their qualifications recognised in the UK until 1st January 2021 and allow them to continue to practise in the UK until then, whilst ensuring that, longer term, they meet new UK requirements.

The Department for Business, Energy and Industrial Strategy has published a Technical Notice titled “Accounting and Audit if there is no Brexit deal”. Apparently no specific guidance on local audit is being proposed.

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