UK Toughens Audit Tests for Fraud, Bankruptcy Risk After Lapses

The UK’s audit watchdog has issued tougher guidelines on how auditors check whether companies are in danger of going bankrupt or have suffered from fraud.

The Financial Reporting Council published the changes to two UK auditing standards Thursday, saying they echoed revisions to global rules from the International Audit and Assurance Standards Board. The UK changes clarify auditors’ responsibilities for detecting financial misdeeds and flagging warning signs of bankruptcy.

They follow a spate of audit oversights in the UK, such as KPMG’s failure to warn of construction giant Carillion plc’s 2018 collapse and Grant Thornton missing a big accounting scandal ...