27 June 2014

FEE: Briefing Papers on the audit reform

Public Oversight of the Audit Profession: Enhancing Credibility and Supporting Cooperation

In the context of the  European legislation, FEE seeks to provide an overview of the changes included in the updated EU provisions regarding public oversight of statutory auditors and audit firms. These provisions are included in the two following pieces of legislation:

• The Directive 2014/56/EU amending Directive 2006/43/EC on statutory audits (2006 SAD) and containing a series of amended and new requirements governing every statutory audit in the European Union (hereafter referred to as “the Directive”);

• The Regulation (EU) No 537/2014 containing additional requirements that relate specifically to statutory audits of Public Interest Entities (PIEs) in addition to the ones stated in the Directive (hereafter referred to as “the Regulation”).

The possibility to delegate certain tasks provides a level of flexibility to Member States and their competent authorities, which are best placed and sufficiently competent to make qualified judgements about the level of delegation that is appropriate to their own specific market conditions. It also enables competent authorities to operate more cost efficiently and helps ensure that these tasks are performed with the highest level of up-to-date experience and expertise while applying the criteria and conditions specified in the Directive and Regulation.

FEE supports the application of this Member State option. According to FEE, an appropriate balance between the need for independence from the audit profession and the skills and knowledge required for the task of supervising the audit profession should be sought.

A proper separation of powers according to the ‘trias politica’ principle may be seen as another argument in favour of the delegation to professional or other bodies where the three powers of ‘legislation’, ‘investigation’ and ‘sanctions’ need to function independently.

Provision of Non-Audit-Services to Public Interest Entity statutory audit clients: A Need for Clarification and Consistency

In the context of the implementation of the new European audit legislation, FEE seeks to address in this paper issues that Public Interest Entities (PIEs), their audit committees and auditors may face in relation to interpreting the requirements of the auditor independence provisions in the legal texts in relation to the provision by auditors of non-audit services (NAS) to statutory audit clients which are PIEs.

The drafting of certain articles in the legal texts leaves considerable scope for interpretation. The European accountancy profession is committed to informing the debate with the objective to enhance consistency in scope and in meaning as far as possible. In addition,

as detailed further below, translation issues have emerged, which could also impact on the objective of ensuring consistent application of the legislation across the EU.

Whilst it is not realistic to expect all Member States to adopt the same approach to implementation, the extent to which there is divergence will increase complexity and costs to business and will not contribute to enhancing confidence in doing business in the EU.

Press release

Briefing paper - Public Oversight of the Audit Profession

Briefing paper - Provision of Non-Audit-Services to Public Interest Entity statutory audit clients

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