Audit policy update

March 2024


  • European Commission issues EU PIE audit market monitoring report
  • IFIAR releases its audit inspection findings report for 2023
  • European Commission calls on CEAOB for new guidelines on sustainability assurance

EU developments

Sustainable assurance: European Commission calls for CEAOB guidance

The European Commission (EC) sent a formal letter inviting the Committee of European Auditing Oversight Bodies (CEAOB) to develop non-binding guidelines to assist statutory auditors and other assurance service providers in sustainability assurance engagements.

The CSRD requires the EC to adopt an EU assurance standard by 1 October 2026. Until then, Member States may still use national standards. The guidelines will aim to ensure consistent practice across the EU during this transitional period. CEAOB is expected to provide a proposal by the end of July 2024. The draft guidelines will be submitted to public consultation and will eventually be adopted later in 2024.

The EC also requested CEAOB to provide technical advice on specific add-ons and possible carve-outs to ISSA 5000 for the upcoming EU assurance standard. CEAOB should deliver this by May 2025.

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EC’s Monitoring Report on the EU PIEs audit market

EC issued its report on developments in the EU market for statutory audit services to public-interest entities from 2019 to 2021. This is the third report after the 2014 EU Audit Reform and based on a survey conducted and data gathered by the CEAOB.

The report focuses on 3 issues:

  • market concentration
  • the risks arising from audit quality deficiencies
  • the performance of audit committees

As part of its key findings, EC suggests that the impacts of the changes from inflationary pressures, rising interest rates, geopolitical instability and increasing use of data analysis tools and AI in the field of audits should be monitored.

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Upcoming: EC’s delegated acts on the Carbon Border Adjustment Mechanism (CBAM)

Later this year the EC intends to publish delegated acts to implement specific provisions of the EU’s CBAM, which provides a level playing field for EU businesses subject to the EU Emissions Trading System.

This includes the rules and criteria governing the role of accredited verifiers, who among other things will need to verify the CBAM declarations submitted by declarant entities.

In the fourth quarter of 2024, the EC will publish a delegated regulation that sets out the conditions that national accreditation bodies must observe when granting accreditation to carry out verification activities for CBAM purposes. This initiative will also outline rules on:

  • the control and oversight of accredited verifiers
  • withdrawing accreditation
  • the mutual recognition and peer evaluation of accreditation bodies

Moreover, an implementing regulation is planned for the fourth quarter of 2024 that will set out more details on:

  • verification principles set out in the CBAM Regulation
  • qualifications of verifiers under the Regulation
  • aligning these qualifications with those for verifiers under the EU’s emissions trading system (ETS).


Council adopts Due Diligence Directive

Following weeks of uncertainty, intense negotiations and five postponed votes, Member States in the Council finally agreed on 15 March on the EU’s Corporate Sustainability Due Diligence Directive (CSDDD). To find a compromise, the Belgian Presidency of the Council negotiated several changes to the initial agreement reached with the European Parliament (EP) in December. These include the following:

  • significantly narrower company’s scope starting from 5.000 employees and EUR 1.500 million turnover and going down to 1.000 employees and 450 million after 5 years. This is estimated to decrease the total number of EU companies covered by the CSDDD from roughly 16.000 to under 5.500
  • a narrower scope of chain of activities to apply for due diligence: downstream chain further decreased by excluding product disposal, dismantling and recycling, as well as composting and landfilling
  • the requirement for companies to provide financial incentives (meaning bonuses) to their directors to promote the implementation of climate transition plans has been deleted
  • civil liability article has been watered down

The EP now has to approve the Council’s amended version. A first step already took place on 19 March, when EP’s legal affairs (JURI) Committee approved the Council version. Final EP ratification is still needed at the April Plenary.

As a reminder, CSDDD provides the possibility for companies to make use of “independent third party verification” to ensure compliance with the obligations. These provisions remain unchanged from December.

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International developments

IFIAR releases 2023 Report on Annual Survey of Audit Inspection Findings

The International Forum of Independent Audit Regulators (IFIAR) released its twelfth annual survey of inspection findings arising from its member regulators’ individual inspections of audit firms affiliated with the six largest global audit firm networks.

Although the percentage of audits with findings has declined from 47% in 2014 to 32% in the 2023 survey, IFIAR stills encourages firms to continue implementing quality management activities.

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Summary of prohibitions applicable to PIE audits

The International Ethics Standards Board for Accountants (IESBA) released a high-level summary of prohibitions in the International Code of Ethics for Professional Accountants, especially in relation to independence for audits of public interest entities (PIEs).

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National developments

FRC-UK report on the competition in the UK audit market

Financial Reporting Council (FRC) published a summary of key findings and potential actions regarding barriers to entry and growth faced by audit firms in the UK.

The FRC highlights the importance of a collaborative, cross-system approach involving the regulator, audit firms, professional accounting bodies, and government, to promote greater competition and choice in the audit market.

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Other news


This curated content was brought to you by Harun Saki, Accountancy Europe Senior Manager, Head of Assurance, since 2019. You can send him tips by email or connect with him on LinkedIn.