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The FCA has issued its first final notice to an audit firm in relation to the performance of a CASS audit. This demonstrates the regulator’s continuing focus on quality in relation to the CASS regime and highlights the importance of firms selecting an appropriately skilled CASS auditor.
The FCA issued the notice to accounting and tax advisory, MacIntyre Hudson LLP who failed to prepare four CASS audits (related to two firms) between 2015 and 2019, in line with the terms of a reasonable assurance engagement. Based on the FCA’s announcement, 25 breaches were not recorded.
What is a CASS audit?
CASS audits are reviews performed by an external auditor to check whether the firm complies with the CASS rules, particularly chapters 3, 6, 7, and 8. This would be done within the last audit period, where the end would be the same as the statutory audit period end.
A CASS audit can either be a reasonable or limited assurance engagement:
- A reasonable assurance engagement is required when the firms’ permissions and their business activities claim they hold client money and/or custody assets.
- A limited assurance engagement is undertaken when the firms’ permissions allow the firm to hold client money and /or custody assets, but the firm does not hold them.
Does my firm need a CASS audit?
Consider whether you have the regulatory permissions to hold client money and custody assets. If the answer is yes, then a CASS Audit would be required. This would be either limited or reasonable depending on whether the permissions were used during the period.
If you’re involved in an activity such as advising (but not investing) in investment and / or insurance products, then you would be within scope of a limited assurance engagement.
How can I select the best auditor?
According to SUP 3.4.2 in the FCA’s auditor’s qualifications handbook, firms must take reasonable steps to ensure that the auditor has the required skills, resources, and experience to perform their role. Performing due diligence when selecting an auditor can help you determine whether they have the relevant experience required to perform CASS audits.
How do I prepare for a CASS audit?
Start by reviewing the key CASS documents (e.g. CASS RP, CASS Policy , and Risk and Control Matrix) to check they are accurate and up to date.
Make sure to check that there’s suitable material over business and process changes which have occurred during the audit period.
Key staff members must be available during the audit period and should be included in all auditor communication for an organised audit process.
How can Bovill Newgate help you prepare for a CASS audit?
Our team of CASS specialists is made up of ICAEW Chartered Accountants with CASS audit experience across several large audit firms.
Our expertise in auditing firms, paired with industry and in-house experience, allows us to determine whether your firm is in scope, and understand your specific CASS audit requirements.
This support includes:
- pre – audit support and preparation
- remediation of auditor breaches
- review of CASS auditor findings
- CASS health checks
- change management advice and support.
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