Audit Policy Update

• Our upcoming event Shaping a future-proof corporate ecosystem 
• CEAOB’s Inspection Sub-Group publishes key inspection findings related to audits of banks and insurance companies 
• A Deep Dive into Sustainability Assurance Engagements 
• Scalebox launched to promote competition and quality for smaller audit firms 

Our upcoming event Shaping a future-proof corporate ecosystem

Accountancy Europe and the European Confederation of Directors Associations (ecoDa) will organise an in-person event in Brussels on 12 October 2023. 

We live in an era of economic, geopolitical, technological and climate disruptions. This poses many risks for the corporate ecosystem but also provides unique opportunities to reinvent it.  

Our event will look into key areas influencing the corporate reporting ecosystem’s resilience. With the main parties playing a role here – companies including their audit committees and shareholders, auditors, policymakers and supervisors – we will explore ways to collectively: 

• enhance quality of corporate reporting 
• meet the public interest entities’ (PIEs) needs through a diverse and resilient audit (assurance) market 
• strengthen companies’ resilience 

Check out the speakers and register 

Council and Parliament reach a provisional agreement on ESAP

The Council and the European Parliament (EP) reached a provisional agreement on three proposals creating the European Single Access Point (ESAP) on 23 May.  

To recall, the ESAP will create a single location to offer EU-wide access to public financial and sustainability-related information about EU companies and investment products.  

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European Parliament adopts Pandora Papers draft report

The EP Plenary adopted a draft report on Pandora Papers: lessons learned with 465 votes in favour, 5 votes against and 36 abstentions on 15 June. MEP Niels Fuglsang (S&D/Denmark) prepared the report.  

The report puts forward EP’s recommendations for addressing issues identified in the October 2021 Pandora Papers scandal. The recommendations cover the role of tax intermediaries, harmful non-corporate tax regimes, misuse of shell entities, and more. 

One of the recommendations calls on the European Commission (EC) and EU Member States “to further analyse and, where appropriate, address the potential conflicts of interest stemming from the provision of legal advice, tax advice and auditing services” and re-iterates EP’s previous “calls on the Commission to consider introducing measures to clearly separate accountancy firms from financial or tax service providers”. 

The report’s recommendations are not legally binding. Still, EC will have to submit a response to EP within the next few months, explaining what action it intends to take. 

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CEAOB’s Inspection Sub-Group publishes key inspection findings related to audits of banks and insurance companies

The Inspection Sub-Group (ISG) of the Committee of European Auditing Oversight Bodies (CEAOB) analysed inspection findings, based on data in its database, related to audits of financial institutions (banks and insurance companies) between 2018 and 2022. 

This infographic summarises key findings and messages.

European Commission publishes a package of legislative proposals on payment services

The EC published a package of legislative proposals on 28 June, including a: 

• proposal for a Regulation on payment services in the internal market. The EC will be tasked with drafting regulatory technical standards setting up “detailed and proportionate reporting and audit requirements” 
• proposal for a Directive on payment services and electronic money services in the internal market. Article 11 of this proposed Directive says that the annual accounts and consolidated accounts of payment institutions shall be audited by statutory auditors or audit firms 

As a next step, the Council and EP will develop their own positions on the proposals, a process that will take a few months. Subsequently, both institutions will need to find a compromise which will eventually become the final EU law.

A Deep Dive into Sustainability Assurance Engagements

The International Federation of Accountants (IFAC) published a study to enhance understanding of current market practice for the assurance of environmental, social, and governance (ESG or sustainability) information. 

The focus is on who conducts assurance engagements, what standards are used, the scope of disclosure being assured, and how various assurance practitioners apply internationally recognised standards set by the International Auditing and Assurance Standards Board (IAASB). 

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Accountancy Europe hosts a roundtable discussion on sustainability assurance

Accountancy Europe hosted a roundtable discussion with around 40 participants in Brussels on 5 July 2023. Representatives of various stakeholders exchanged views on key issues, including their expectations from assurance service providers, the practical implications of the Corporate Sustainability Reporting Directive (CSRD) assurance requirement and the role of the professional standard(s) on assurance. 

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IFIAR report on its 2022 Survey of Enforcement Regimes

The International Forum of Independent Audit Regulators (IFIAR) released its report on Audit Regulators’ enforcement regimes. The report details the investigative and disciplinary powers of IFIAR Members and how Audit Regulators exercised those powers, including history and trends since 2018. 

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Accountancy Europe responds to the IIASB’s proposed Global Internal Audit Standards 

The International Internal Audit Standards Board (IIASB) has released a new Global Internal Audit Standards draft for public comment. In our response, we welcomed the initiative reiterating that stakeholders in the corporate reporting ecosystem need to work together with a systemic approach to reinforce corporate resilience.  

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Accountancy Europe responds to the IESBA’s proposed Strategy for 2024-27

The International Ethics Standards Board for Accountants (IESBA) released its proposed strategy and work plan 2024-2027 for public comment. 

Our comment letter states that: 

• sustainability reporting and assurance should be given the highest priority 
• the IESBA should assess the adoption and implementation of recent significant revisions to its Code of Ethics, and 
• we are committed to collaborating with the IESBA in its efforts to respond to public interest issues 

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H3C releases technical guidance on limited sustainability assurance engagement

The French audit regulatory authority High Council of Auditors (H3C) released a technical guidance on limited assurance over sustainability reporting. An English version of the guidance will become available shortly. The guidance was prepared by a working group composed of representatives of H3C, statutory auditors and assurance providers. 

As a reminder, according to the European CSRD, the first companies will have to apply the new rules on sustainability reporting starting from the 2024, for reports published in 2025. The Directive also makes it mandatory for companies to have an audit of the sustainability information that they report, starting with limited assurance with the end goal to move to reasonable assurance in the longer term. 

Read more (in French)

Scalebox launched to promote competition and quality for smaller audit firms

The UK Financial Reporting Council (FRC) has launched its new initiative to assist smaller firms in conducting high-quality audits in the PIE market. 

The Scalebox initiative aims to promote competition and choice in the PIE audit market and support the FRC’s role as an Improvement Regulator. 

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PCAOB enhances audit requirements for considering a company’s non–compliance with laws and regulations

The Public Company Accounting Oversight Board (PCAOB-US) proposed changes to its auditing standards to strengthen auditor requirements to identify, evaluate, and communicate non-compliance with laws and regulations, including fraud.  

The deadline for public comment on the set of proposals is 7 August 2023. 

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