Accountancy Europe calls for audit supervision reform that is designed to reinforce trust and support capital markets
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In a speech delivered in Lisbon on 15 September, Commissioner Albuquerque presented the European Commission’s (EC) vision for the future of EU audit markets, confirming that no comprehensive audit reform is planned for now.
The Commissioner emphasised the central role of audit in building trust for the Savings and Investments Union (SIU), underlining that “auditors are a fundamental line of defence.” She stressed the importance of strong ethics and oversight for investor confidence, while noting that the EC does not currently plan to embed the IESBA Code into EU law, though its adoption by Member States will be monitored.
Albuquerque was clear that the EC sees no “compelling case for far-reaching changes” to EU audit rules, concluding that the 2014 reform has brought real improvements. She also ruled out reforms on internal controls and corporate governance.
However, audit supervision reform emerged as a key focus. The Commissioner cited concerns over diverging resources and enforcement practices among Member States, fragmented supervision for cross-border companies, inefficiencies, and limited capacity of the CEAOB to achieve convergence. She also pointed to new challenges arising from large audit networks and technological developments such as AI.
To address these issues, the EC will launch a public consultation to assess options for strengthening audit supervision. Albuquerque stressed a pragmatic approach, aiming to determine “what is necessary and what is not.” A possible legislative proposal could follow in the second half of 2026.
Accountancy Europe released a statement stressing that a well-designed audit supervision reform is essential to reinforce trust and support capital markets.
The International Auditing and Assurance Standards Board (IAASB) is taking further steps to support the implementation of ISSA 5000, the global baseline for consistent and high-quality sustainability assurance.
Stakeholders are invited to submit implementation questions of broad, cross-jurisdictional relevance. These will help the IAASB identify areas where additional guidance and resources are needed.
Advisory groups, together with IAASB outreach, will help identify adoption challenges and shape timely, practical responses.
To assist practitioners, the IAASB has also released reference extracts from ISSA 5000 that present only the material relevant to limited assurance engagements and, separately, to reasonable assurance engagements.
The IAASB has issued narrow-scope amendments to ISQMs, ISAs, and ISRE 2400 (Revised) in response to updated definitions of “Listed Entity” and “Public Interest Entity” in the IESBA Code of Ethics.
The changes revise the definition of “listed entity” to match IESBA’s definition, and introduce a framework recognising when entities other than Publicly Traded Entities (PTEs) might require enhanced requirements.
For review engagements under ISRE 2400 (Revised), there’s now a requirement for public disclosure in the practitioner’s review report when independence requirements specific to certain entities, such as PIEs, have been applied.
The IESBA has issued its final pronouncement on International Ethics Standards for Sustainability Assurance (IESSA), including new Independence Standards, along with revisions to the Code relating to sustainability reporting and assurance.
The standards aim to address risks to the integrity, quality, and effectiveness of sustainability assurance, such as bias, conflicts of interest, pressure to act unethically, fraud (including greenwashing), non-compliance with laws and regulations, and threats to assurance practitioners’ independence.
Accountancy Europe responded on the IAASB’s exposure draft about narrow-scope amendments tied to IESBA’s “Using the Work of an External Expert” project.
While we support the objective of aligning IAASB standards with the revised IESBA Code, we believe this needs to be achieved without compromising the flexibility of the proposed amendments or creating operational challenges for practitioners.
Looking ahead, we encourage a more holistic approach to standard-setting, with stronger coordination between IAASB and IESBA.
The IESBA has issued a staff alert highlighting ethical and independence considerations related to private equity (PE) investment in accounting firms.
The alert identifies potential threats to fundamental principles, including confidentiality and integrity, and emphasises risks to independence, particularly when a PE investor holds a controlling interest in the firm or has financial stakes in the firm’s audit clients.
It stresses the importance of robust monitoring and governance frameworks to manage these risks and maintain public trust.
Read now Accountancy Europe’s first paper on the trends and insights of PE investments in the accountancy and audit sector in the European market.
The UK’s Financial Reporting Council (FRC) has launched a new initiative, the Scalebox Programme, to help small audit firms grow and raise audit quality, especially those aiming to serve PIE audits.
Recognising smaller firms have limited resources, the FRC will provide tailored support, including a more proportionate regulatory oversight during 2025-26 and 2026-27, as long as participating firms show progress in improving their systems of quality management.
The move is intended to balance stricter requirements under ISQM (UK) 1 with realistic expectations for less complex PIE audits, while maintaining high standards for audit quality.
FRC has launched the second phase of its Future Audit Supervision Strategy (FASS), inviting stakeholder feedback on proposed reforms aimed at enhancing audit quality and accountability.
Key proposals include adapting supervision to assess the effectiveness of audit firms’ Systems of Quality Management, refining graded file inspections to reflect firms’ audit portfolios, and reducing inspection work for the 12 largest PIE audit firms during a transition period.
The FRC also plans to remove the current tiering structure in reporting and apply a more proportionate supervisory approach across the market. Stakeholders are encouraged to submit responses by 30 September 2025.
