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« Eighth » Company Law Directive Statutory Audit REPARIS Workshop Vienna, 14 March 2006 Jean-Philippe Rabine

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« Eighth » Company Law Directive Statutory Audit REPARIS Workshop Vienna, 14 March 2006 Jean-Philippe Rabine. Structure of the presentation. Directive on Statutory Audit: status of adoption Presentation of the main features Subject Matter and Definitions

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Presentation Transcript
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« Eighth » Company Law Directive Statutory Audit
  • REPARIS Workshop
  • Vienna, 14 March 2006
  • Jean-Philippe Rabine
structure of the presentation
Structure of the presentation
  • Directive on Statutory Audit: status of adoption
  • Presentation of the main features
    • Subject Matter and Definitions
    • Approval, Registration and Mutual Recognition
    • Auditing Standards and Audit reporting
    • Quality Assurance
    • Auditors’ liability
    • Public Interest Entities
    • International Aspects
modernisation of the eighth directive
Modernisation of the Eighth Directive
  • Directive of 1984 will be replaced
  • A comprehensive, principles based new Directive
  • Timing:
    • Commission proposal March 2004
    • Council general approach 7 December 2004
    • Single reading with the EP: 28 September 2005
    • Agreement by ECOFIN Council: 11 October 2005
    • Possible formal adoption: Spring 2006
    • Transposition by Member States into national law: 24 months spring 2008
subject matter and definitions
Subject Matter and Definitions
  • STATUTORY AUDIT REQUIRED BY COMMUNITY LAW
  • KEY DEFINITIONS:
    • Network
    • Public Interest Entities
    • Non-practitioner
    • Key Audit Partner
approval ownership and registration of statutory auditors and audit firms
Approval, ownership and registration of statutory auditors and audit firms
  • Approval
  • Mutual recognition of statutory auditors between Member States (aptitude test)
  • Liberalised ownership and management requirements for audit firms approved in the EU (Majority and Nationality)
  • Enhanced public registration of statutory auditors and audit firms

(Electronic, accessible to public, Information about shareholders, management, membership of a network, name and address of competent authorities)

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Auditing Standards and report
  • Adoption of International Standards on Auditing
  • Group auditor bears the full responsibility for the group audit report
  • Rules on audit of components by other auditors (review and documentation)
  • Audit report to be signed by an individual, not by the audit firm
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External Quality Assurance Systems
  • Principles:
    • Independent from the reviewed auditors (and avoid conflicts of interest)
    • Stable, secure, and independent funding
    • Inspectors: sufficient knowledge and experience in audit
    • Public oversight system has the ultimate responsibility
  • Scope and conduct:
    • At least every 6 years (PIE: 3 years)
    • Scope review: based on selected audit files
    • Follow up by auditors: failure -> santions
  • Report on activities:
    • Annual report
next steps auditors liability
Next steps: Auditors’ liability
  • Article 30a of 8th Company Law Directive: Auditors’ liability with regard to statutory audits and listed companies
  • Report from the Commission: end of 2006
  • 2007: Possible Commission recommendation to the Member States
auditor s liability preparatory steps
Auditor’s liability: Preparatory steps
  • Study on the economic impact of the alternative liability regimes, the competition in the market and the availability of the insurance.
  • Dialogue between investors and auditors is also essential  forum to obtain the opinion from market experts
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Public Interest Entities
  • Transparency report by audit firm

(Information inter alia about the audit firm’s practice, turnover, quality assurance systems and events, etc.)

  • Audit committee or a body performing equivalent functions
    • Monitor financial reporting process, provision of onon audit services, independence, effectiveness of internal controls
    • Composition (one independent member or disclosure of all members)
  • Rotation of key audit partners, but rotation of audit firms for Member States still allowed
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International dimension
  • Registration of individual auditors and audit firms in Member States only if third country’s rules on independence and on auditing standards equivalent
  • Derogation in the case of equivalence of the third country public oversight systems
  • Access to audit working papers
    • Transfer via the national competent authorities only
    • Adequacy of working arrangements assessed by the Commission
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Further information

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DG Markt website:

http://europa.eu.int/comm/internal_market/en/company/index.htm

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