Financial services audit and assurance
Firms in the financial services sector face some of the strictest reporting obligations in any industry. The FCA, PRA, and capital markets authorities all demand transparency, accurate financial reporting and timely disclosure. Your auditor needs to match that standard – and understand the regulatory compliance framework behind it.
We provide audit and assurance services to FCA-regulated financial services firms, including investment managers, insurance intermediaries, bank subsidiaries, wealth management companies, and those active in the capital market. Our dedicated team brings deep technical knowledge of the regulatory landscape and the specific accounting challenges the financial services industry creates.
What is a financial services audit?
A financial services audit examines whether a regulated firm’s financial statements give a true and fair view of its financial position. But it goes further than a standard commercial audit. The auditor must also consider the firm’s regulatory compliance, its capital adequacy position, client money handling, and the specific reporting frameworks that apply to the sector.
An independent audit of financial statements in the financial services industry isn’t just about the numbers. It covers business models, governance structures, and the quality of disclosure. For firms reporting under IFRS, the audit process covers areas like fair value measurement, hedge accounting, and expected credit loss provisioning under IFRS 9. UK GAAP reporters face different challenges around FRS 102 Section 11 and 12 financial instrument disclosures.
The scope of the audit depends on the firm’s regulatory permissions, the types of assets it holds or manages, and whether it handles client money. A wealth management firm with discretionary investment authority faces different audit risks from an insurance intermediary processing premium flows.
Sectors we cover
Our financial services audit work spans several sub-sectors:
- Investment managers and asset managers – fund-level and management company engagements, CASS compliance, performance fee calculations, and carried interest accounting
- Insurance intermediaries – client money audit, IBA reconciliations, commission income recognition, and premium trust fund compliance
- Capital markets participants – CASS audit, best execution reporting, and MiFID II transaction reporting requirements
- Fintech and payment services firms – safeguarding audit, e-money reconciliations, regulatory capital calculations, and PSR compliance
- Wealth management – client portfolio valuation, suitability file reviews, and FCA Section 166 skilled person reports
- Insurance companies – Solvency II reporting, technical provisions, and regulatory capital requirements for insurers
CASS audit and client money
FCA-regulated firms that hold client money or custody assets must comply with the Client Assets Sourcebook (CASS). The CASS audit is a specialist engagement separate from the financial audit of the company’s own accounts. We examine the firm’s client money and custody asset arrangements and report directly to the FCA on whether the firm has maintained adequate systems and controls.
Getting CASS wrong has serious consequences. The FCA treats client money failures as a priority enforcement matter. Recent enforcement actions have resulted in fines running into millions of pounds. Common CASS issues we identify include:
- Client money reconciliation gaps, particularly around daily internal reconciliations
- Acknowledgement letters missing or out of date with banks holding client funds
- Mixed remittance handling, where client and firm money arrive in the same payment
- Custody asset records that don’t reconcile to third-party custodian statements
- Inadequate CASS resolution packs that wouldn’t support an orderly wind-down
Our work with audit committees and compliance teams helps financial services clients maintain strong CASS controls and build trust with their stakeholders. We flag issues early so firms can fix them before the FCA’s own supervisory visits.
Regulatory capital and prudential requirements
FCA-regulated firms must maintain adequate financial resources at all times. The specific requirements depend on the firm’s categorisation under the Investment Firms Prudential Regime (IFPR), which replaced the old BIPRU and IFPRU rules in January 2022.
The audit considers whether the firm’s own funds meet the minimum capital requirement, whether the K-factor calculations are correct (for firms that fall within the IFPR’s scope), and whether the Internal Capital Adequacy and Risk Assessment (ICARA) process is adequate. For smaller firms, the minimum capital requirement may be a fixed amount – but even that needs monitoring, particularly where trading losses could erode the capital base.
We review regulatory capital positions as part of the standard financial services audit engagement. If a firm’s capital is tight, we discuss the going concern implications with the directors and the audit committee before issuing the audit opinion.
Consumer Duty and its impact on audit
The FCA’s Consumer Duty (in force from July 2023) introduced new requirements around fair value, consumer understanding, and customer support. While Consumer Duty is primarily a conduct regulation, it has audit implications.
Firms must be able to demonstrate that their products and services offer fair value. For financial services firms, this can affect revenue recognition – particularly commission income, platform charges, and performance fees where the FCA might challenge whether the pricing is fair to the end consumer. The audit considers whether any potential redress obligations arising from Consumer Duty reviews need to be provisioned or disclosed.
AML and financial crime compliance
Every FCA-regulated firm must have adequate anti-money laundering (AML) controls. While the audit doesn’t provide assurance on AML compliance directly, we do consider whether weaknesses in AML controls create risks for the financial statements. Potential regulatory penalties, costs of remediation programmes, and the impact of AML-related restrictions on business activities can all have material financial consequences.
For firms offering payments or e-money services, the regulatory environment around financial crime is particularly demanding. We understand the reporting obligations and the financial statement implications of operating in this space.
Our approach to financial services audit
We don’t apply a generic checklist. At planning stage, we invest time to understand your business model, the risks you’re managing, and the regulation that shapes your operations. We tailor every engagement to the firm’s risk profile, and the audit committee gets clear, direct reporting on the issues that matter.
For capital markets firms and asset managers handling large transaction volumes, we use data analytics to test entire populations rather than relying on samples. This gives better audit assurance and often identifies anomalies that sample-based testing would miss.
We maintain transparency on fees throughout the engagement. Financial services audits are complex, but that doesn’t mean the pricing should be opaque. We quote a fixed fee based on the firm’s regulatory permissions, transaction volumes, and complexity – and we stick to it.
Why financial services firms choose us
We’re ICAEW-regulated and on the Register of Statutory Auditors. We offer specialist financial audit without Big Four overhead, with full integrity and transparency on fees. For each stakeholder – from board members to investors to the FCA – our audit provides the confidence and assurance they need in the numbers.
If your firm needs an auditor who understands financial services regulation, call us on 0161 832 4451 or request a proposal.
