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PRACTICAL IMPLEMENTATION OF THE REQUIREMENTS OF THE STATUTORY AUDIT DIRECTIVE: REGULATION OF THIRD COUNTRY AUDIT ENTITIES WITHIN THE EUROPEAN UNION The Directive on Statutory Audit 2006/43/EC (“the Directive”)1, adopted by the European Union on 17 May 2006 and for transposition into the national law of Member States by 29 June 2008, includes specific provisions on the regulation of the auditors of non-EU2 companies that have issued securities admitted to trading on EU regulated markets (“third-country audit entities”). Article 45 of the Directive sets out regulatory requirements for the registration of third-country auditors and audit entities, for continuing oversight including the external monitoring of the quality of their audit work, and for investigations and sanctions. Article 46 allows Member States to derogate from these requirements where third-country audit entities are subject in their home country to a system of public oversight, inspections and investigations which the European Commission has recognised as equivalent 3 or for which it has adopted transitional arrangements. The Commission Decision 2008/627/EC of 29 July 20084 exempts for a transitional period5 certain third-country audit entities from the requirements of Article 45, on the condition that they provide relevant Member States with specific information. Member States may register such audit firms to this end. EU auditor oversight bodies, with the support of the European Commission, recognise the importance of putting in place practical arrangements for third country audit firms that are not over-burdensome and reflect as far as possible a common approach across the EU.
1 Directive 2006/43/EC of the European Parliament and of the Council of 17 May 2006 on statutory audits of annual accounts and consolidated accounts, amending Council Directives 78/660/EEC and 83/349/EEC and repealing Council Directive 84/253/EEC (OJ L 157, 9.6.2006, p. 87) Directive as amended by Directive 2008/30/EC (OJ L 81, 20.3.2008, p. 53). 2 For this purpose, the EU includes all members of the European Economic Area - that is EU Member States plus Norway, Iceland and Lichtenstein. 3 Deciding on equivalence is a matter for the European Commission and Member States. There is a work programme to assess the equivalence of third countries’ regulatory systems. To date no third country regulatory system has been recognised as equivalent by the European Commission. 4 Commission Decision 2008/627/EC of 29 July 2008 concerning a transitional period for audit activities of certain third country auditors and audit entities (OJ L 202, 31.7.2008, p.70). 5 The transitional period applies in respect of audits of annual accounts for financial years starting between 29 June 2008 and 1 July 2010.
To this end, the members of the European Group of Auditors' Oversight Bodies (EGAOB) have worked together to develop collaborative arrangements with the objective that third country audit entities:
• can use common application forms and guidance material, to the extent they come from transitional countries ( Form “A” and FAQ “A”). Information requirements applicable under the transitional regime are defined in the Commission Decision 2008/627/EC of 29 July 2008 on transitional arrangements. Member States may implement the necessary information requirements by a registration but cannot introduce information requirements beyond the Commission Decision on transitional arrangements.
• can use common application forms and guidance material, to the extent they
come from non-transitional countries (Form “B” and FAQ “B”). Audit entities from non-transitional countries remain subject to article 45 of the Directive and must apply for full registration with the relevant Member States. Member States may include additional national requirements;
• can expect to submit applications for registration with competent authorities
in the relevant Member States as soon as possible. Whilst this is a matter for each Member State, the EGAOB recommends that, where possible, this should be from 1 October 2008;
The further intention is that Member States:
• can work closely together in considering applications for registration so that
decisions on registration in different Member States are taken on a consistent basis. However, registration remains necessary in each Member State where a non-EU company's securities are admitted to trading on a regulated market. Registration is not possible with the European Commission;
• can, in the longer term, work closely together, and with third-country audit
regulators, to avoid applying overlapping or unnecessary regulatory requirements, for example on external inspections of third-country audit entities.
Third-country audit entities wishing to register in a Member State should contact the competent authority in the relevant Member State directly. The Annex gives contact information on relevant EU auditors' oversight bodies with the responsibility for the regulation of third-country audit entities. A list of the regulated markets in the European Union as of 1 March 2008 can be found in: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2008:057:0021:0027:EN:PDF
Should you have any question on the common application forms, the annexes or the frequently asked questions please send them to the following email box until the 8th September 2008: [email protected]
Disclaimer This document, drawn up within the European Group of Auditors' Public Oversight Bodies, is not binding on the European Commission as an Institution.
ANNEX
PROVISIONAL LIST OF COMPETENT AUTHORITIES IN THE RELEVANT MEMBER STATES AND EEA COUNTRIES
MEMBER STATES MEMBER OF THE EGAOB WEBSITE
Belgium High Council for the Economic Professions http://www.cspe-hreb.be
Denmark Danish Commerce and Companies Agency http://www.eogs.dk
Finland Auditing Board of the Central Chamber of Commerce (AB3C) http://www.keskuskauppakamari.fi/en_GB/
France Haut Conseil du Commissariat aux Comptes (H3C) http://www.h3c.org/
Germany Auditor Oversight Commission ( AOC) www.apak-aoc.de
Italy Commissione Nazionale per le Società e la Borsa (CONSOB) www.consob.it/
Ireland Irish Auditing and Accounting Supervisory Authorithy (IAASA) http://www.iaasa.ie/
Luxembourg Commission de Surveillance du Secteur Financier (CCSF) http://www.cssf.lu/
Netherlands Netherlands Authority for the Financial Markets (AFM) http://www.afm.nl/
Norway Financial Supervisory Authority of Norway www.kredittilsynet.no
Slovakia Authority for Oversight of Performance of Audit http://www.finance.gov.sk/En/
Spain Instituto de Contabilidad y Auditoria de Cuentas (ICAC) http://www.icac.meh.es/
Sweden Swedish Supervisory Board of Public Accountants http://www.revisorsnamnden.se/rn/index.html
United Kingdom Professional Oversight Board of the Financial Reporting Council (FRC) http://www.frc.org.uk/pob/regulation
