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European Parliament’s (EP) Plenary adopted on 16 January its own-initiative, non-legislative report on annual EU competition policy, with a majority of 481 votes in favour, 42 against and 93 abstentions. Work on the report was led by a Member of the EP (MEP) Stephanie Yon-Courtin (RE/France). The purpose of the report is to provide a scrutiny tool for MEPs to assess the level of competition and competitiveness across different sectors of the European economy.
Among the report’s several recommendations, it also argues, for example, that “the combination of audit and advisory businesses can lead to conflicts of interest” and can reinforce market dominance by the largest audit firms. The report calls on the European Commission (EC) “to investigate the audit and advisory business combination and to possibly present measures to prevent conflicts of interest and market dominance”.
EC published in the EU Official Journal, on 21 December, the final Delegated Act (DA) that adjusts small and medium-sized entities’ (SME) financial thresholds in the Accounting Directive to inflation. This means that the DA is now a part of EU law and can be implemented by EU Member States.
The DA faced no objections from either the EP or Member States in the Council during the mandated two-month scrutiny period.
Among other objectives, the DA reduces the number of companies obligated to comply with mandatory reporting requirements, including those subject to mandatory statutory audit. This is achieved by raising the financial thresholds that determine the size of a company classified as an SME. The new thresholds are applicable from January 2024 in principle, but Member States may choose to apply the new size thresholds retroactively from January 2023.
Upon the completion of the EU’s ordinary legislative procedure, the legislative acts on the European Single Access Point (ESAP) were published on the EU official journal on 20 December 2023.
ESAP will provide the public with easy centralised access to information about companies and their products which are of relevance to financial services, capital markets and sustainability. It is the first action in the EU Capital Markets Union (CMU) Action Plan.
ESAP does not create any new disclosure requirements, instead it builds upon existing requirements laid down in the EU legislation.
European Securities and Markets Authority (ESMA) has been tasked with establishing and running ESAP by 10 July 2027.
Among other information, the following will be accessible via ESAP:
The new maximum EU thresholds for small companies, 7,5 million EUR for balance sheet and 15 million EUR for net turnover, are expected to apply in the Netherlands retroactively, as from 1 January 2023. This will exempt 900 companies from having to be audited.
Read more (in Dutch)
Following stakeholder support for the importance of good corporate governance, the Financial Reporting Council (FRC) has prioritised revisions to the Code in the area of Internal Controls.
In this context, the existing expectations in the Code remain. Namely that the Board should monitor the company’s risk management and internal control framework and, at least annually, carry out a review of its effectiveness. The existing Code also includes the provision that monitoring and review should cover all material controls, including financial and reporting ones. The main change the FRC is now making is asking Boards to explain through a declaration in their Annual Reports how they have done this and their conclusions.
It is for a Board to determine what should comprise its material internal controls. It is also for individual boards to decide whether external assurance is required over controls, and to what degree.
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