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Regulatory developments

Regulatory developments. Dublin February 2012. Regulatory developments. Green paper of the European Commission. October 13, 2010 : Green Paper First step in the process to elaborate a law at European level : Discussion document open to public comments. May 2011 : Report to the parliament

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Regulatory developments

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  1. Regulatory developments Dublin February 2012

  2. Regulatory developments Green paper of the European Commission • October 13, 2010 : Green Paper • First step in the process to elaborate a law at European level : Discussion document open to public comments. • May 2011 : Report to the parliament • September 13, 2011 : European Parliament Resolution • November 2011 : Draft legislation • Regulation for PIEs • Directive for non PIEs

  3. Regulatory developments What were the objectives? • Open a discussion on : • Role of the auditor • Governance and independence of audit firms • Supervision of auditors • Configuration of the audit market • Creation of a European passport • Simplifications for SMEs / SMPs

  4. Regulatory developments Items included in the draft regulation • Conditions for carrying out statutory audit of PIEs • Independence and avoidance of conflicts of interest • Confidentiality and professional secrecy • Performance of the statutory audit • Audit reporting • Transparency reporting by statutory auditors and audit firms and record keeping • Appointment of statutory auditors or audit firms by PIEs • Surveillance of the auditors of PIEs Education Experience Examination Ethics Enforcement

  5. Regulatory developments Non audit services • 3 categories of services • Related financial audit services • 8 Prohibited services • 4 Permitted services subject to pre approval of audit committee or regulator • Difference to be made between the firm expressing the opinion and the network • For Network : threats and safeguards approach and 3 prohibited services and 5 services with a rebuttable presumption that independence is affected • “Audit only firm” for auditors of large PIEs with revenue of more than EUR 1.5 Billion in the EU

  6. Regulatory developments Fees • Limitations on fees • Fees from related financial audit services < 10% of the fees of the statutory audit • If total amount of fees received from a client exceed 20% or 15% during 2 consecutive years • Disclosure to the audit committee • Information to audit authority that make the decision whether the auditor can continue or not for a period not exceeding 2 years

  7. Mandatory rotation • Minimum duration of a statutory audit of 2 years • Renewable only once • Maximum duration of the combined 2 engagements : 6 years • 9 years in case of joint audit • In exceptional circumstances, subject to pre approval of the supervisor, extend duration to 8 years • 12 years in case of joint audit • Cooling of period of 4 years • Partner rotation every 7 years with a 3 years cooling off period

  8. Regulatory developments Othermatter of attention • Record all the breaches to the regulation • When suspected illegal acts : • Inform the audited entity and invite it to investigate the matter and take measures • If measures not appropriate, information of the supervisors of PIEs • Confirmation of independence ; • In the audit report • To the audit committee • Employment for an audit client • Cooling off period of 2 years for key audit partners and 1 year for others involved in the audit

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