FSA tightens rules for auditors’ client assets reports

The FSA has published ten new requirements for firms and their external auditors in order to improve the quality and consistency of auditors’ client assets reports.

It comes after the regulator found some auditors were providing ‘clean' reports despite firms committing serious breaches of client asset rules, covering the wrong chapters of the client asset sourcebook and failing to provide adequate details on issues and exceptions identified in their report.

Among the new rules is the requirement for auditors to use a template for their reports and to deliver reports on client assets within four months from the end of the reporting period.

Richard Sutcliffe, leader of the FSA's client assets unit, says: "Ultimately it is a firm's responsibility to ensure they have adequate systems in place, but we rely on their auditors to provide some of the necessary independent assurance.

"These new rules make it crystal clear for firms what we require of their external auditors when it comes to producing high quality and consistent client assets reports.

"The rules confirm and strengthen our requirements in this area and also mean that should we fail to see improvements we will be able to take action more easily."

The changes affect regulated firms and particularly those which hold and control client money or assets, as well as those which do not hold client money and assets but carry out designated investment business.