Audit Policy Update

• European Commission receives 219 responses to its initiative on corporate reporting
• CEAOB work programme for 2022
• Dutch Quartermasters for the Future of the Accountancy Sector publish their third report

War in Ukraine – what European accountants need to know

The invasion of Ukraine has devastating impacts. We condemn the Russian government’s attacks on Ukraine and are concerned about all people affected by these acts of war. While the EU and individual countries impose sanctions, European accountants need to step up and address how these, and other consequences of the war, affect their activities. As the situation evolves, professional accountants must continue being in self-questioning mode and apply their ethical values. We draw their attention to points of alert on anti-money laundering (AML), cybersecurity, accounting, audit, and reporting to help them do the right thing in these difficult times. Read more

European Commission receives 219 responses to its initiative on corporate reporting

The feedback period for the European Commission’s (EC) Call for evidence and Consultation on corporate reporting has been closed.

Responses to the Call for evidence are available on the initiative’s webpage and contributions to the Consultation, including some statistical information, have also been made available (see here). The total of valid responses received, according to the EC’s webpage, is 219. As informed in the February issue of our Audit Update, Accountancy Europe has submitted its responses and made them available here.

Note that a summary or analysis of the responses is not yet available. The EC’s legislative proposals remain planned for the fourth quarter 2022.

CEAOB work programme for 2022

The Committee of the European Auditing Oversight Bodies (CEAOB) has published its 2022 work programme and the detailed plans of each of its sub-groups which, amongst other matters, refer to:

• working towards high degree of supervisory convergence at EU level
• continued interest in quality initiatives by the firms
• work on information & cyber security
• exploration of new areas of cooperation within CEAOB (e.g., strategies on oversight of professional bodies)
• follow-up on Corporate Sustainability Reporting Directive (CSRD) developments
  • the CEAOB will assess the implications of this project in terms of control of such reporting by independent third parties, and if deemed appropriate will provide advice to the EC
  • the CEAOB will discuss challenges on assurance on sustainability information and determining those to be addressed in an assurance standard
• the CEAOB members collecting information in 2022 about how audit committees fulfil their mission
• the Enforcement sub-group’s plan to work on examining the real effects of sanctions to auditors’ and audit firms’ behaviour and the link to audit quality
• the Market monitoring sub-group plans to focus on the development of the indicators to be used for the fourth market monitoring report

The 2022 work programme also includes a revised mission statement of the CEAOB, with more prominence given to supporting audit quality, and its newly defined core strategies.

Read more

Note that apart from its new work programme, the CEAOB has recently made available:

• CEAOB response to EC’s consultation on corporate reporting
• comment letter to International Auditing and Assurance Standards Board (IAASB) on audit of less complex entities

IAASB issues First-time Implementation Guide for ISA 220

The IAASB released an implementation guide for the International Standard on Auditing (ISA) 220, Quality Management for an Audit of Financial Statements. This standard deals with the specific responsibilities of the auditor regarding quality management at the engagement level for an audit, and the related responsibilities of the engagement partner.

Along with the suite of quality management standards, it was released in December 2020 and will come into effect on 15 December 2022.

Read more

IESBA addresses transformative effects of technology and independence expectations in group audits

The International Ethics Standards Board for Accountants (IESBA) released for public comment two Exposure Drafts, proposing revisions to the Code of Ethics, relating to:

• technology
• the definition of engagement team and group audits

Dutch Quartermasters for the Future of the Accountancy Sector publish their third report

In the context of the ongoing audit reform in the Netherlands, the Dutch Quartermasters have published their third progress report.

The Quartermasters are (cautiously) more positive than in the earlier reports, but continue to emphasise that further steps need to be taken, especially in the field of accountancy firms’ culture. They refer to the report of the Dutch Authority for the Financial Markets (AFM) which sees gradual improvements in audit quality. The AFM report pointed out room for improvement but also highlighted things that are going well in the sector.

The quartermasters have also:

• pointed out the lack of progress in the area of fraud
• published the final audit quality indicators (AQIs). These have been slightly adjusted compared to the consultation on the topic, training focused on Environmental, Social and Governance (ESG) topics is added. Mandatory public reporting on AQIs will require legal anchoring. This is the overview of the eleven main AQIs split in four categories:

1. Quality control:
   • involvement of the external auditor
   • weaknesses in audits and financial statements
   • current matters: fraud and continuity
2. Quality management system:
   • quality-enhancing measures
   • quality control systems
3. Context:
   • culture
   • audit team turnover
   • investments in innovative technology
   • budget overrun
   • new – training hours ESG
4. Ecosystem:
   • client satisfaction

Read more (in Dutch)