Implementation of EU Audit Reform - IESBA | IFAC€¦ · Note: Slovenia has not yet fully...
Transcript of Implementation of EU Audit Reform - IESBA | IFAC€¦ · Note: Slovenia has not yet fully...
Implementation of EU Audit Reform
Noémi Robert, Senior Manager, Accountancy Europe
Agenda Item
5A
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• Implementation status and scope
• Progress & specific challenges re important
provisions implementation
• Actions at EU level
On today’s menu
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Implementation status & scope
8
Implementation status
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Implemented
Not implemented
April 2018 Update
Note: Slovenia has not yet fully implemented the
new EU audit rules. In Iceland and Norway, the
new audit rules become applicable later (date to
be set). Therefore, information on these countries
in the following slides is subject to change.
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PIE definition landscape before 2014 reform
1010
2017 PIE survey
Progress & specific challenges re important provisions implementation
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Mandatory audit firm rotation
1Prohibition
of non-audit services
2 Role of audit committee
& fee-related matters
3
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Mandatory audit firm rotation
1Prohibition
of non-audit services
2 Role of audit committee
& fee-related matters
3
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• General rule: PIEs must rotate auditor after 10 years
• Member States’ options to:
• Shorten the 10 years
• Extend up to 20 years with ‘public’ tender or up to 24 years with
joint audit
Recap : Mandatory audit firm rotation
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Mandatory audit firm rotationInitial duration of engagement
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5 Years
7-9 Years
10 Years
* 5 years for SIFIs
** 8 years for banks
*** 9 years for banks
April 2018 Update
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Mandatory audit firm rotation Tender extension
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No extension
1-2 Years
6 Years
9 Years
10 Years
*Extension of duration not applicable
to banks and insurance undertakings
** Initial duration of engagement
extendable up to 10 years
*** No extension for banks
**** 10 years extension for existing
engagements (first appointment
between 2003 and 2014)
April 2018 Update
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Mandatory audit firm rotation Joint audit extension
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No extension
4 Years
10 Years
14 Years
15 Years
* Mandatory joint audit For Bulgaria it is only for banks, insurance
undertakings and pension funds
** No extension for banks
*** 14 years extension for existing engagements (first
appointment between 2003 and 2014)
April 2018 Update
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Main take away
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• Consistency in setting the initial duration of engagement period at
10 years
• Damageable divergences on the duration and the use of the
option to allow extensions of the initial duration
• Overview: 17 different mandatory audit firm rotation regimes
across the European Union
Progress & specific challenges re important provisions implementation
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Mandatory audit firm rotation
1Prohibition
of non-audit services
2 Role of audit committee
& fee-related matters
3
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• The auditor of PIEs cannot provide certain non-audit services to the
audited entity and its related undertakings
• ‘Black list’ included in the Regulation (art 5)
“Tax services relating to preparation of tax forms; payroll tax […]
Services that involve playing any part in the management or decision-making of the audited entity
Bookkeeping and preparing accounting records and financial statements payroll services
Designing and implementing internal control or risk management procedures […] valuation services […]
Legal services, with respect to the provision of general counsel […]
Services related to the audited entity’s internal audit function […]”
Recap: Provision of non-audit services (1/2)
2020
• Member States’ options to
• Be more restrictive than the EU list
• Allow certain tax and valuation services under strict conditions
• The provision of ‘permissible’ services is
• Subject to the approval of the audit committee following an
assessment of the threats to independence and safeguards
applied
• Capped to 70% of the average of statutory audit fees paid in
the last three consecutive years
Recap: Provision of non-audit services (2/2)
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Non-audit services Additional prohibitions
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List of prohibitions as
per the Regulation
‘White’ list approach*
Additional
prohibitions
* Auditors and audit firms can only provide the
non-audit services included in the “white” list.
April 2018 Update
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Non-audit services Derogation of prohibition – Tax & valuation services
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No
Certain tax services under the conditions of the
Regulation
Certain tax & valuation services under the
conditions of the Regulation
April 2018 Update
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Non-audit services Allowed NAS cap
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70% cap
30% cap
April 2018 Update
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Main take away
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• Clear trend to stick to the list of prohibitions included in the
Regulation
• The large majority of Member States opted for derogation of
prohibition of certain tax and valuation services within the
conditions laid out in the Regulation
• Only one Member State (Portugal) opted to lower the NAS cap
below 70%
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• EU legislation focus almost entirely on independence
• IESBA Code is not basis for EU Audit legislation
• EU legislation goes significantly further than IESBA Code for PIE
audits
Independence & ethics
Mandatory audit firm rotation
1Prohibition
of non-audit services
2 Role of audit committee
& fee-related matters
3
Audit committees responsible for
• Auditor selection
• Reviewing and monitoring auditor independence
• Reviewing and monitoring the appropriateness of the provision of
non-audit services
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Focus on auditor selection
• Structured process followed by reasoned recommendation to the
supervisory body
• The audit committee will ensure
• Auditor independence towards management
• ‘Fit for purpose’ selection criteria
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Other actions at EU level
Tax transparency and fair taxation
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• Follow-up of the European Parliament PANA Committee
recommendations
• European Commission response
• In 3 years after objective assessment of audit reform
implementation
• Earlier EC review of audit reform IF…
EU debate on tax & audit
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Concluding remarks
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