FRC issues revised CASS Assurance Standard

  • By Jeremy Williams
  • 27 November 2019 11:28

On Monday, the FRC revised and reissued the CASS Assurance Standard which applies to ‘CASS audits’, assurance engagements on client assets to the FCA.

The original CASS Assurance Standard was issued four years ago and, following extensive consultation, the FRC determined that only minimal changes were needed to ensure that it remained up-to-date and effective. The majority of the new Standard’s 177 paragraphs and appendices are unaltered, and most changes are minor stylistic changes to the text.

What are the key changes?

The most significant change relates to the requirement for engagement quality control reviews (EQCRs) for ‘reasonable assurance’ engagements. Whereas the old Standard required EQCRs for all such engagements, paragraph 137 in the new version restricts this absolute requirement to CASS audits of investment businesses classified by the FCA as ‘Large’ or ‘Medium’ (as set out in rule CASS 1A2.7R within the FCA Handbook). For other engagements, auditors must use judgement to decide whether an EQCR should be performed. This will be welcome news for many CASS audit teams, especially those for very small firms of insurance brokers and debt or claims management firms where the EQCR requirement added significant cost to the audit.

Other less significant changes include an increased focus on reporting control deficiencies to ‘those charged with governance’ as well as to management, and the possible use of ‘System and Organisation’ (SOC) Reports to provide evidence that outsourced CASS functions are properly controlled.

When is the Standard effective and can we early adopt?

The revised Standard applies to CASS audits for reporting periods beginning on or after 1 January 2020. Since most CASS reporting periods span a year (a maximum 53 weeks) and CASS reports are due four months from this period end, the new Standard will have been fully adopted by the end of April 2021.

Whereas the old Standard explicitly stated that early adoption was possible, the revised version does not. We understand that this omission was due to the relatively minor nature of the update. However, the lack of possible early adoption will disappoint those who stand to benefit from the revised requirements for EQCR (see above). We are trying to clarify whether early adoption remains a possibility despite the lack of explicit statement.

What about Mercia’s FCA Specialist Assignment Manuals?

Regardless of whether the revised Standard can be early-adopted (see above), we expect to issue updates to the FCA(DIF) and FCA(MGI) manuals in the first quarter of 2020. Current users of the manuals will receive an email alert notifying them when the updated versions are ready to download.

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