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The Implementation of the 8th Directive in Hungary

The Implementation of the 8th Directive in Hungary. Katalin Fekete V ice P resident Hungarian Chamber of Auditors. New law is in progress. Waiting for the official publication of the Directive Bill has been prepared by the Chamber Implementation in 2006 (or 2007?).

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The Implementation of the 8th Directive in Hungary

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  1. The Implementation of the 8th Directivein Hungary Katalin Fekete Vice President Hungarian Chamber of Auditors March 14, 2006 Vienna

  2. New law is in progress • Waiting for the official publication of the Directive • Bill has been prepared by the Chamber • Implementation in 2006 (or 2007?) March 14, 2006 Vienna

  3. Registration and qualification • Chamber has the registration right • Natural persons and firms are registered • Qualification • University degree • Certified accountant qualification • One year professional practice • Max 3 years training courses • Exams of 7 modules • Professional practice of 3 years in mentor system • Competence exam March 14, 2006 Vienna

  4. Auditor in part time job? • Because of historical reasons it is a big issue in Hungary. • Current system: audit can be practice only in full time job. • No specific requirements in the Directive • If the government follows the wording of the Directivethe Hungarian profession would step back March 14, 2006 Vienna

  5. Liabilitysystem • No limited liability in Hungary • Auditors are insured • No bigger claims against auditors • Government is waiting for the result of the study and EC proposal March 14, 2006 Vienna

  6. Audit fee • Strong price competition • No guidance relating to the audit fee • Hungarian Competition Office is against the regulation. March 14, 2006 Vienna

  7. Independence • General principles in the law • Further details in IFAC code and ethical regulation of the Chamber • Non-audit services performed by auditors (e.g. accounting and tax advice)regulated by the law March 14, 2006 Vienna

  8. Rotation in the current system • No difference between listed and non-listed companies • Public interest isn’t defined in the law but the term is used during the external quality control • No firm rotation • 5 years auditor’s rotation exists in banks, insurance companies, funds,etc.) • Cooling-off period is different March 14, 2006 Vienna

  9. Rotation after the implementation • No firm rotation • Public interest has tobe defined • Listed/traded companieshave to be differentiated • 7 years rotation + 2 years cooling offperiod should be unified March 14, 2006 Vienna

  10. Auditing standards • ISA + some special legal requirements = Hungarian standard on auditing from 2001 in Hungary • Standard are updated regularly. March 14, 2006 Vienna

  11. External quality control 1 • Based on EU recommendation • Monitored peer-review system • Organized by the Committee of the Chamber • Carried out every 6th or 3rd year • Annual report on the general findings • 1500 auditors 2002-2005 March 14, 2006 Vienna

  12. External quality control 2 • Result of the investigation: • Meets requirements, • Meets but needs further development • Failed • Actions after negative outcome • Written warning • Obligation to attend training • Disciplinary procedures (incl. removal from the register) March 14, 2006 Vienna

  13. Public Oversight in Hungary • Legal supervision exist, no public oversight • Oversight will be created by the new act. • Final responsibility, direct investigationand monitoring March 14, 2006 Vienna

  14. Oversight Committee • No bureaucratic, costly solution • OC governed by non-practitioners (direct invitation) They are respectable persons, acknowledged experts of accounting, finance, law, financial reporting • Minority practitioners • Funding must be free from undue influence of auditors (financed from the state budget) • Transparency of oversight activity March 14, 2006 Vienna

  15. More information • www.mkvk.hu, • mkvk@mkvk.hu • Katalin.fekete@hu.ey.com March 14, 2006 Vienna

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