Audit Policy

May 2020

  • Publication: Coronavirus’ impact on auditing for 2019 year-ends and beyond
  • IAASB issues its Strategy and Work Plan for the upcoming years
  • UK: Audit reforms on hold during crisis
  • Netherlands: Accountants fear claims because of fraud-prone labour costs subsidies
  • Portugal: Audit oversight authority issues English translation of the new guidelines on audit quality indicators

Coronavirus’ impact on auditing for 2019 year-ends and beyond

Our latest publication focuses on how the coronavirus outbreak impacts businesses and the people that audit them. It aims to support European auditors in adapting their work to new circumstances in ongoing audits with 2019 year-ends and beyond. To this end we have analysed corona crisis related auditing guidance, as issued by global and national regulators and professional institutes. We highlight the following main matters for auditors to consider:

  • obtaining audit evidence
  • auditor’s assessment of going concern
  • auditor’s reporting

As the situation evolves, we will keep collecting new guidance on our webpage Coronavirus resources for European accountants. Most of the matters in this publication apply also to audits with closing dates after 2019. We will shortly issue an additional overview with main matters for consideration specifically for audits with 2020 closing dates.

Audit exemption thresholds in Europe: 2020 update

Following the 2013 Accounting Directive, small European Union (EU) companies are no longer required to have a statutory audit. However, the EU legislation allows Member States to impose an audit on their small companies.

This publication follows up on our 2016 factsheet and presents the current audit exemption thresholds in Europe. It also presents how several countries have recently amended them, with the latest changes in the thresholds occurring in Slovakia at the beginning of 2020.

Our survey results show that four EU countries have lowered their audit exemption thresholds while four countries have increased them between 2016 and 2020. Overall, there was no clear upward or downward trend in the development of the thresholds in this period. We also found diverging national policies and views on auditing smaller entities.

Overview: Our work on the future of audit & assurance

Since 2014, Accountancy Europe has explored the Future of Audit and Assurance in events, publications, opinion pieces and consultation responses. We started this international stakeholders’ debate to stimulate innovation in statutory audit and explore other assurance services to meet stakeholders’ needs.

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IAASB proposes modernisation of group audits standard

The International Auditing and Assurance Standards Board (IAASB) released the exposure draft of proposed International Standard on Auditing (ISA) 600 (Revised), Special Considerations—Audits of Group Financial Statements (Including the Work of Component Auditors).

The exposure draft is open for public comment until 2 October 2020.

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IAASB issues its Strategy and Work Plan for the upcoming years

The IAASB published its Strategy for 2020‒2023 and Work Plan for 2020‒2021 including the following key elements:

  • increase the emphasis on emerging issues
  • innovate the IAASB’s ways of working
  • maintain and deepen relationships with stakeholders

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UK: Audit reforms on hold during crisis

An overhaul of how the accounting industry is regulated is set to be delayed by the government because of the chaos facing financial markets due to the coronavirus outbreak.

The deadline for the call for evidence for the latest inquiry Delivering Audit Reform launched by the Business, Energy and Industrial Strategy (BEIS) Committee has been extended from 4 May to 31 July 2020.

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UK: FRC Transformation Programme towards becoming ARGA

The Financial Reporting Council (FRC) continues to make progress towards becoming the Audit Reporting and Governance Authority (ARGA). It takes forward work on the recommendations of Sir Kingman’s Review of the FRC, the Competition and Markets Authority (CMA) Review and Sir Donald Brydon’s Review into the Quality and Effectiveness of Audit.

The FRC’s Transformation Programme comprises of the following six workstreams:

  • Setting up the new regulator
  • Audit scope & regulation
  • Corporate regulation
  • Corporate reporting
  • Corporate governance
  • Market reform

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Netherlands: Quartermasters appointed to ensure audit reform implementation

Finance Minister Hoekstra has appointed two quartermasters to ensure implementation of the recommendations of the Committee on the Future of the Accountancy Sector (CTA). The appointment of Marlies de Vries, an assistant professor and former CTA member, and Chris Fonteijn, a former chairman of the Authority for Consumers & Markets (ACM), is effective as from 1 May 2020 for a period of three and a half years.

Progress on the audit reform delivery, however, is being slowed down due to the corona crisis also in the Netherlands. The parliamentary debate initially scheduled for 22 April has been postponed.

Read more (in Dutch)

Netherlands: Accountants fear claims because of fraud-prone labour costs subsidies

In the Netherlands, in the context of the corona crisis, all companies that have received subsidies from the government related to labour costs will need an accountant’s / auditor’s report and opinion to be able to file their 2020 financial statements. This is called a NOW accountant’s/auditor’s report. However, it is unclear for the moment what should be included in such report, which standards need to be used, etc. The Dutch accountancy profession is therefore in discussions with the government trying to find a way how to tackle the lack of standards and the risk of the measure being susceptible to fraud.

Read more (in Dutch)

Portugal: Audit oversight authority issues English translation of the new guidelines on audit quality indicators

The Audit Policy Update from January 2020 informed about the new guidelines on audit quality indicators (AQIs) in Portugal. These guidelines became applicable already for audits related to financial year 2019. They set the following 8 AQIs:

  • AUDIT HOURS – proper involvement of employees with more experience
  • PARTNER WORKLOAD – availability (hours) of the partner who is in charge of the audit
  • EXPERIENCE – years of experience of auditors and staff
  • TRAINING – number of hours of training of auditors and staff
  • TURNOVER RATE – percentage of employee departure
  • HOURS PER AUDIT PHASE – hours spent on each audit by phase (planning, execution and reporting) and indication of completion dates
  • RESULTS OF INTERNAL AND EXTERNAL QUALITY CONTROLS – results of monitoring processes (internal and external)
  • QUALITY CONTROL FUNCTIONS – hours of employees assigned to the areas of quality control

The Portuguese Securities Market Commission (CMVM), the audit oversight authority, has now issued an English translation of the guidelinesThis curated content was brought to you by Júlia Bodnárová, Accountancy Europe Senior Advisor since 2017. You can send her tips by email and connect with her on LinkedIn.