Audit Policy Update

• Our proposals for streamlining countries’ rules on non-audit services and auditor rotation
• EU’s 6th package of sanctions against Russia includes accountancy services
• Restoring trust in audit and corporate governance: plans on reforms announced in the UK
• Recordings of our recent webinars on Audit Quality Indicators and ESEF/CSRD/ESAP available

Our proposals for streamlining countries’ rules on non-audit services and auditor rotation

Our new publications on non-audit services and mandatory auditor rotation highlight how differently 30 European countries have implemented the 2014 EU audit rules in these areas. This is especially due to the use of the related Member State options that allow different national implementation.

Different national regimes lead to complexity, additional compliance costs and practical and operational difficulties for internationally operating companies and audit firms. Therefore, we propose streamlining the rules on non-audit services and mandatory auditor rotation to create a level playing field in Europe. Refer to the publications for details of our proposals to improve the current state.

In this series of publications, we also plan to shortly issue publications on:

• the definition of a Public Interest Entity (PIE) in European countries and how different national definitions result in the different scope of EU PIE audit rules
• the audit oversight regimes in European countries and how different national regimes may lead to inconsistent application of the EU audit rules and inconsistencies in audit quality

With this series of four publications, we aim to inform policymakers in the context of the European Commission’s (EC) ongoing initiative on corporate reporting. They follow up on our response to the related consultation from earlier this year.

European Parliament’s ECON Committee adopts position on green bonds

The European Parliament’s (EP) Committee on Economic and Monetary Affairs (ECON) adopted on 16 May its draft position.

In this context, an amendment (nr. 477) was also adopted at the vote. It states that the green bond assessment activities by external reviewers shall be considered as a non-audit service in the sense of Article 5(1) of the EU Audit Regulation.

As a next step, the EP and the Council will need to negotiate a compromise between their respective positions on the initial EC proposal. These ‘trilogues’ will take several months and are expected to bring a final decision.

EU’s 6th package of sanctions against Russia includes accountancy services

EU’s heads of governments adopted on 3 June the latest – 6th – package of sanctions against Russia due to its attack on Ukraine. The EC swiftly published the sanctions package in the EU Official Journal, meaning that they are now legally binding in the EU.

The main discussion on the package was on oil imports from Russia. However, the adopted package also prohibits the provision of auditing, including statutory audit, accounting, bookkeeping and tax consulting services to entities, legal persons and bodies established in Russia, as well as to the Russian government.

The Council decision document Article 1k Paragraphs 1-5 gives further details on the scope of these sanctions. The Council Regulation, for its part, defines these services in more detail.

IAASB publishes key takeaways from its recent LCE conference

On 3-4 May 2022, the International Auditing and Assurance Standards Board (IAASB) held the 3rd and final Paris conference to discuss and explore how to proceed with the separate standard for audits of the financial statements of Less Complex Entities (LCEs).

Accountancy Europe participated in a panel discussion and our representative highlighted that the LCE standard is a crucial step towards increasing the efficiency of SME audits.

The IAASB issued a summary of the discussions with more than 130 Conference participants from 33 jurisdictions.

Read more

Restoring trust in audit and corporate governance: plans on reforms announced in the UK

The UK Government has announced its intentions to proceed with reforms on strengthening the UK’s audit, corporate reporting and corporate governance systems. Overall, the reform aims to bring more transparency and accountability for businesses, investors, accountants and auditors.

The Government plans to proceed with reforms that include:

• establishing a new and stronger regulator, the Audit, Reporting and Governance Authority (ARGA)
• recognising the public interest in large private companies and making their reporting more useful
• strengthening reporting about companies’ internal controls
• improving the quality of audit and making it more informative
• boosting resilience, competition and choice in the audit market
• making directors of the country’s biggest companies more accountable in their duties
• strengthening oversight of the accountancy and actuarial professions

Read more on the Government’s plans and here one of the first reactions from the press.

Webinar on Audit Quality Indicators

Following our publication on Audit Quality Indicators (AQIs), we held a webinar on this topic on 18 May.

We heard further insights about the experiences in Germany, the Netherlands, Portugal and the United States of America.

Watch the recording

Webinar on ESEF, CSRD and ESAP

At our 30 May webinar, we brought together an esteemed panel of speakers. They shared their insights on three significant EU initiatives for the transparency and digitalisation of capital markets information:

• European Single Electronic Format (ESEF)
• Corporate Sustainability Reporting Directive (CSRD)
• European Single Access Point (ESAP)

Watch the recording