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In line with the European Commission Regulation No. 1606 of 2002, listed companies in the UK are required to use International Financial Reporting Standards (IFRSs) in their consolidated accounts. A 2008 European Commission report on the implementation of the Regulation No. 1606 points out that the United Kingdom permits IFRSs as adopted in the EU in the annual accounts for listed companies and in the annual and consolidated accounts for all other companies, except for the charity sector. Companies which choose not to apply IFRSs follow UK Generally Accepted Accounting Principles (GAAP), which includes but are not limited to Financial Reporting Standards (FRSs) issued by the UK Accounting Standards Board (ASB). According to a number of publications on the subject, FRSs differ from IFRSs. However, in March 2004, the ASB released its "Discussion Paper: UK Accounting Standards - A Strategy for Convergence with IFRS," in which it announced that it intends to bring national accounting standards in line with IFRSs so as to avoid the use of two different sets of accounting rules in the United Kingdom. After extensive public consultations with the stakeholders, as explained by David Loweth of the ASB in his presentation at the Accountants' Forum 2008, the ASB gradually moved from the initial ¡°phased approach¡± to convergence to a ¡°big bang¡± model, which implies mandatory adoption of IFRS-based UK standards on a specified future date. As of 2009, some of the UK FRSs are already based on the corresponding international standards. The ASB¡¯s intent is to incorporate amendments to the existing IFRS-based UK standards concurrently with the International Accounting Standards Board. In line with this strategy, in 2008 the ASB issued the improvements to UK FRSs, in order to incorporate the IASB¡¯s Improvement Project. In sum, as indicated in the 2008/2009 Financial Reporting Council Annual Report, the ASB remains committed to convergence; however, the strategy for achieving it remains under consideration.

In December 2004, the Auditing Practices Board (APB) - the auditing standard-setter in the United Kingdom and Ireland - issued International Standards on Auditing (ISAs) (UK and Ireland) effective for periods commencing on or after December 15, 2004. According to the APB, these national standards are based on ISAs as then issued by the International Auditing and Assurance Standards Board (IAASB). Since 2004, however, the IAASB has revised some ISAs. In addition, in 2005 the IAASB, in order to improve the clarity of the international standards, introduced the 'Clarity Project' which entailed revising or redrafting existing ISAs. The Project was finalized at the end of 2008. In October 2008, the APB published a consultation paper seeking the stakeholders’ opinion on whether to adopt the revised and clarified ISAs. After extensive consultations, the APB in a March 2009 Press Notice announced its intention to update its auditing standards to incorporate the changes introduced by the Clarity Project. As a consequence, the APB issued for public comment exposure drafts of 33 Clarified ISAs (UK and Ireland) with the period for comment ending on July 22, 2009. When finalized, the new standards will replace the existing ISAs (UK and Ireland) and International Standards on Quality Control (UK and Ireland) 1 with effect for audits of financial statements for periods ending on or after December 15, 2010. One of the areas where the APB believes further improvements in international standards are needed is ISA 700 on audit report, the clarified version of which is not expected to be adopted in the UK.