Our new publication’s findings show that 5 European countries lowered their audit exemption thresholds while 4 countries increased them between 2016 and 2021. Overall, there was no clear upward or downward trend in the development of the thresholds in the last 5 years.
In the longer-term, however, we noted a clear increase in the thresholds in the majority of European countries. On average, countries’ thresholds for balance sheet and net turnover tripled between 2006 and 2021. More specifically, 23 countries increased the threshold for their balance sheet amount and 22 countries increased the threshold for the net turnover in this period.
We also found diverging national policies and views on auditing smaller entities.
The guidelines issued by the Committee of European Auditing Oversight Bodies (CEAOB) aim to clarify matters around the appointment of auditors by public interest entities (PIEs). The guidelines are non-binding and take the form of Q&As to tackle practical issues. Member States are encouraged to implement them in their respective jurisdictions to ensure a consistent approach across the European Union (EU).
The European Commission (EC) launched a consultation on the functioning of the European Financial Supervisory Authorities (ESAs) on 12 March. It aims to collect information on
The consultation also refers to Wirecard, asking whether pan-European supervision in the field of auditing and financial reporting should be enhanced, and whether the European Securities and Markets Authority (ESMA) should have a role in the Audit Directive and Regulation.
Interested parties should submit their responses to the consultation by 21 May 2021.
European Parliament (EP)’s Economic and Monetary Affairs (ECON) and Legal Affairs (JURI) Committees held a hearing on the lessons learnt from Wirecard on 23 March. The hearing hosted a panel of expert speakers:
The hearing focused on all relevant aspects of Wirecard, including corporate governance, audit, supervision, enforcement, and investors. From the audit angle, focus was on discussing audit market concentration, conflicts of interest from the provision of consulting & audit services, and the fact that auditors are selected and paid for by audited entities.
The International Auditing and Assurance Standards Board (IAASB) published its non-authoritative guidance on applying the standard ISAE 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information to Extended External Reporting (EER) assurance engagements.
EER encapsulates many different forms of reporting, including but not limited to sustainability or environmental, social and governance reporting, and reporting on corporate social responsibility.
The guidance responds to ten key challenges commonly encountered in applying ISAE 3000 (Revised) to EER assurance engagements.
See also this recent article by IAASB Chair Tom Seidenstein on this topic.
The International Forum of Independent Audit Regulators (IFIAR) released its ninth annual survey of inspection findings arising from its member regulators’ individual inspections of audit firms affiliated with the six largest global audit firm networks. The survey collected information about two categories of inspection activities – those relating to firm-wide systems of quality control and those relating to individual audit engagements.
IFIAR notes that the findings rate remains high, and audit firms need to make continued efforts to address the high level of findings and inconsistencies. IFIAR members reported in the 2020 survey that 34% of audit engagements inspected had at least one finding. The inspection results included in the survey are for inspections of audits concluded prior to the advent of the pandemic.
The proposed reforms aim to reinforce investor and public confidence in audit, and plan to make directors of the country’s biggest companies more accountable if they have been negligent in their duties. The reforms also seek to empower investors, creditors, workers, and other stakeholders by giving them access to reliable and meaningful information on a company’s performance.
Some of key proposals include:
The consultation is open to everyone with an interest in this area, and responses are welcome until 8 July 2021.