What mainly determines the scope of a statutory audit?

The scope of a statutory audit is primarily determined by legal and regulatory frameworks, notably the Companies Act 2006 and the International Standards on Auditing (ISAs). The Companies Act 2006 establishes the legal requirements for statutory audits in the UK, including who is required to have an audit, the responsibilities of auditors, and the nature of audit engagements. Additionally, ISAs provide a comprehensive set of guidelines that define the auditor's responsibilities and the necessary procedures to follow during the audit process.

These frameworks ensure that audits are consistent, reliable, and conducted in accordance with established standards, which are designed to maintain the integrity of financial reporting. They outline the extent of testing, reporting requirements, and the necessary professional skepticism that auditors must apply, ensuring that the audit is thorough and addresses the risks relevant to the specific context of the client's business.

In contrast, while an engagement letter may outline specific terms agreed upon by the auditor and the client, it cannot supersede the requirements set forth in legislation or professional standards. The accountant's personal judgment plays a role in planning and performing the audit but is guided by the overarching regulations and standards. Industry standard practices can influence the application of audit procedures but are also generally aligned with the statutory requirements and professional standards.