Standing for trust and integrity

Developments in Auditing

19 September 2014, SOEL Conference Andr Kilesse, FEE President

Presentation content

About FEE

New Audit Policy

Related FEE Projects

2

Standing for trust and integrity

About FEE

FEE federates professional institutes across Europe

4

47 professional institutes of accountants and auditors 36 European countries, including all EU 28 800,000 professionals including all sections of the

profession: large, medium, small practices, business, public sector

FEE adds value to Members 5

Representation toward stakeholders

Analysing and

influencing public policy developments

Promoting

cooperation among Members

Informs, advises & influences EU & international regulation, public policy, standard setting etc.

EC, EP, Council, ESMA, EBA, EIOPA, IOSCO - IASB, EFRAG, IIRC, IFAC, IAASB, IESBA, IPSASB, CAGs, PCAOB, OECD etc.

Facilitates consensus between Institutes, accountancy firms (big & small)

Standing for trust and integrity

New Audit Policy

New legislative texts

Directive 2014/56/EU amending the Directive 2006/43/EC3 (2006 SAD) on every statutory audit in the EU

Regulation (EU) No 537/20144 containing requirements that relate specifically to statutory audits of Public Interest Entities (PIEs)

7

Who will be affected? 8

Directive: horizontal measures, applicable to all statutory audits within the EU

Regulation: stricter requirements for the audits of Public Interest Entities (PIEs) that include: Credit institutions Listed companies Insurance undertakings Other entities designated as such by Member

States

When will this take effect? 9

17 June 2016 Directive need to be transposed into

national laws Most of the provisions in the

regulation take effect

16 June 2014

Entry into force Transitional arrangements start to take effect

27 May 2014

Publication in the Official Journal of the EU

Main provisions of the Directive

More specific provisions in the areas of Independence and objectivity Quality assurance, investigation and

sanctions (see below) Internal organisation of the auditor and audit

work ISA adoption: EC development process Functioning of audit committees of PIEs

10

Directive - Quality assurance and supervision (1)

Competent Authority (CA) has ultimate responsibility for the oversight of: Approval and registration of auditors Adoption of relevant standards Continuing education, quality assurance

system, investigative and administrative disciplinary systems

11

Directive - Quality assurance and supervision (2)

Quality assurance reviews, investigations and disciplinary matters can no longer be delegated to professional bodies for PIE audits

Quality assurance reviews: Frequency follows from risk-based

approach and if PIE/non PIE To be appropriate and proportionate to the

scale & complexity of the audited entity

12

Regulation: Main provisions

Auditor communication (see below) Non-audit services (NAS) (see below) Mandatory audit firm rotation (MAFR) (see

below) Cooperation of audit oversight bodies and

Creation of Committee of European Auditing Oversight Bodies (CEAOB)

13

Regulation: Auditor Communication

More extensive public reporting: For all entities, disclosure of a statement

on any material uncertainty that may cast doubt about the entitys ability to continue its activities as a going concern

For PIEs only, reporting on the most significant risks of material misstatements

Additional report to the Audit Committee

14

Regulation: Prohibition of non-audit services (NAS)

List of prohibited NAS during the period audited until issuance of audit report includes:

A number of tax services Valuation services Services involving playing any part in the management or

decision making of the audited entity Services linked to the financing, capital structure etc.

But MS may establish stricter rules and/or may opt to allow valuation services and certain tax services, if no direct or immaterial effect on the audited financial statements

15

Even the period before for specific

services

Regulation: Limitation of permitted (NAS)

16

NAS outside of the list Provision subject to Audit Committee approval, and Are capped at 70% of the average audit fees charged by

audit firm over the preceding three consecutive years

Average 80 70 % = 56

Regulation: Mandatory audit firm rotation (MAFR)

17

Maximum duration of audit engagement < 10 years, but MS may set a shorter duration

Unless MS decides to extend rotation period to: Max. 20 years in case of tendering, or Max. 24 years in case of joint audit

Cooling-off period of 4 years Transitional arrangements apply

Audit firm appointment for PIE: at least one-year term

In some EU Member States, already set

differently

Standing for trust and integrity

FEE related projects

Online FAQ

19

Options Tables

Factsheets

Briefing Papers

20

Stay connected!

@FEE_Brussels @FEE_SMP

Follow: Federation of European Accountants Join: Connect with European Professional Accountants

FEE newsletter Subscribe at www.fee.be

Visit us @ www.fee.be

Developments in AuditingPresentation contentAbout FEEFEE federates professional institutes across EuropeFEE adds value to MembersNew Audit PolicyNew legislative textsWho will be affected?When will this take effect?Main provisions of the DirectiveDirective - Quality assurance and supervision (1)Directive - Quality assurance and supervision (2)Regulation: Main provisionsRegulation: Auditor CommunicationRegulation: Prohibition of non-audit services (NAS)Regulation: Limitation of permitted (NAS)Regulation: Mandatory auditfirm rotation (MAFR)FEE related projectsOnline FAQBriefing PapersStay connected!