{"id":12357,"date":"2022-07-25T22:37:59","date_gmt":"2022-07-25T22:37:59","guid":{"rendered":"http:\/\/legalblog.ie\/?p=12357"},"modified":"2022-09-25T07:36:39","modified_gmt":"2022-09-25T07:36:39","slug":"audit-public-interest-entities","status":"publish","type":"post","link":"https:\/\/legalblog.ie\/audit-public-interest-entities\/","title":{"rendered":"Audit Public Interest Entities [EU]"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_63 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/legalblog.ie\/audit-public-interest-entities\/#Statutory_audit_of_public-interest_entities\" title=\"Statutory audit of public-interest entities\">Statutory audit of public-interest entities<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/legalblog.ie\/audit-public-interest-entities\/#Fee_structures\" title=\"Fee structures:\">Fee structures:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/legalblog.ie\/audit-public-interest-entities\/#Ban_on_non-audit_services\" title=\"Ban on non-audit services:\">Ban on non-audit services:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/legalblog.ie\/audit-public-interest-entities\/#Preparation_for_statutory_audits\" title=\"Preparation for statutory audits\">Preparation for statutory audits<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/legalblog.ie\/audit-public-interest-entities\/#Irregularities\" title=\"Irregularities:\">Irregularities:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/legalblog.ie\/audit-public-interest-entities\/#Audit_reports\" title=\"Audit reports:\">Audit reports:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/legalblog.ie\/audit-public-interest-entities\/#Additional_requirements\" title=\"Additional requirements\">Additional requirements<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/legalblog.ie\/audit-public-interest-entities\/#Appointment\" title=\"Appointment\">Appointment<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/legalblog.ie\/audit-public-interest-entities\/#Surveillance\" title=\"Surveillance\">Surveillance<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/legalblog.ie\/audit-public-interest-entities\/#CEAOB\" title=\"CEAOB\">CEAOB<\/a><\/li><\/ul><\/nav><\/div>\n<h3><span class=\"ez-toc-section\" id=\"Statutory_audit_of_public-interest_entities\"><\/span>Statutory audit of public-interest entities<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>It aims to improve transparency in the audit market to strengthen public confidence in the annual and consolidated financial statements of public-interest entities (PIEs).<br \/>\nIt does so by laying down rules on:<\/p>\n<ul>\n<li>audits of public-interest entities;<\/li>\n<li>organisation and selection of statutory auditors and audit firms to guarantee their independence and avoid conflicts of interest;<\/li>\n<li>supervision of statutory auditors and audit firms.<\/li>\n<\/ul>\n<p>The regulation sets out:<\/p>\n<p>Conditions for carrying out statutory audit of public interest entities, notably:<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Fee_structures\"><\/span>Fee structures:<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Payments for permitted non-audit services, if supplied for 3 or more consecutive years, should be limited to a maximum of 70% of the average of the statutory audit fees paid in the previous 3 years;<br \/>\nstatutory auditors or firms must declare to the audit committee* if they receive from a single PIE more than 15% of their total income 3 years running to determine whether this is a threat to their independence and if safeguards are in place.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Ban_on_non-audit_services\"><\/span>Ban on non-audit services:<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Auditors carrying out a statutory audit of a PIE may not provide a wide range of non-audit activities, such as tax and legal advice or preparation of accounts, to the company, or parent or subsidiaries, while conducting the audit or during the previous financial year;<\/p>\n<p>EU governments may relax some of the restrictions or ban other services depending on their impact on an auditor\u2019s independence;<\/p>\n<p>Auditors carrying out a statutory audit may provide non-audit services which are not specifically banned subject to the approval of the audit committee.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Preparation_for_statutory_audits\"><\/span>Preparation for statutory audits<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Auditors, before accepting or continuing an engagement for a statutory audit of a PIE:<\/p>\n<ul>\n<li>must ensure the independence requirements are met;<\/li>\n<li>confirm annually in writing to the audit committee that the firm, partners and senior managers are independent from the PIE;<\/li>\n<li>discuss with the audit committee any threats to their independence and the safeguards applied.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Irregularities\"><\/span>Irregularities:<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Auditors must:<\/p>\n<p>inform the company if they suspect financial irregularities or fraud have taken place and ask it to take the necessary action. If it fails to do so, they inform the appropriate authorities;<br \/>\nreport promptly to the appropriate authorities if, during an audit, they uncover illegal behaviour, a threat or doubt about the PIE\u2019s viability or decide to refuse to issue an audit opinion or to deliver an adverse or qualified one.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Audit_reports\"><\/span>Audit reports:<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Statutory auditors produce an audit report and an additional report to the audit committee. Each is subject to a quality control review before publication;<br \/>\nthe audit report, drafted in clear and unambiguous language, describes, among other things, the most significant risks identified and the auditor\u2019s response to them and key observations;<br \/>\nthe additional report provides more detailed information, such as scope and timing of the audit and methodology used, for the audit committee.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Additional_requirements\"><\/span>Additional requirements<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>publication of an annual transparency report, available on its website for at least 5 years, containing detailed information about the company and its activities;<br \/>\nsubmission annually to the relevant authority of income from PIEs broken down by revenue from statutory audit and various non-audit services;<br \/>\nretention for at least 5 years of documents and information specified in the regulation.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Appointment\"><\/span>Appointment<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>A general meeting of shareholders or members of the PIE appoint the auditor on the basis of a recommendation from the audit committee. This contains at least 2 choices and explains why one is preferred;<br \/>\na PIE is free to invite any auditor or firm to submit proposals and the tender should not exclude small firms which received less than 15% of their total audit fees from PIEs the previous calendar year;<br \/>\na PIE appoints an auditor initially for 1 year and a maximum of 10 years. This can be raised to 20 years for a public tendering process and 24 years where a company is audited by at least 2 audit firms;<br \/>\na gap of 4 years must occur before an auditor can audit the same company again;<br \/>\nauditors provide a hand-over file containing all relevant information and the most recent audit to their successor.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Surveillance\"><\/span>Surveillance<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>EU governments appoint an authority to supervise auditors and firms carrying out statutory audits of PIEs. The authorities:<br \/>\nare independent of statutory auditors and audit firms;<br \/>\nrespect professional secrecy;<br \/>\nmay not interfere with the content of audit reports;<br \/>\nhave the necessary supervisory and investigative powers, including accessing data and inspecting firms, either on their own, working with other authorities or help of the judiciary;<br \/>\nestablish and implement an effective system of audit quality assurance;<br \/>\nfollow clear rules on the appointment of inspectors and their activities;<br \/>\nmonitor the market for the provision of statutory audit services to PIEs, especially the performance of audit committees, market concentration in specific sectors or any failings by firms;<br \/>\npublish a report by 17\/6\/2016, and every 3 years thereafter, on market developments (based on these reports, the<\/p>\n<p>European Commission will publish a joint report on these developments at the EU level);<br \/>\npublish annual activity reports, work programmes and assessments of the quality assurance system;<br \/>\ncooperate with their counterparts in other EU countries, particularly on quality assurance reviews, investigations and on-site inspections;<br \/>\nmay exchange information with colleagues in non-EU countries subject to certain conditions.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"CEAOB\"><\/span>CEAOB<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The regulation establishes the Committee of European Auditing Oversight Bodies (CEAOB). This:<br \/>\ncontains one senior representative from each national authority and one from the European Securities and Markets Authority;<br \/>\nprovides advice to the European Commission and national authorities, contributes technical expertise, plays a coordinating role and encourages exchange of information, expertise and best practice;<br \/>\nmay establish permanent or ad hoc sub-groups on specific issues.<\/p>\n<!--themify_builder_content-->\n<div id=\"themify_builder_content-12357\" data-postid=\"12357\" class=\"themify_builder_content themify_builder_content-12357 themify_builder tf_clear\">\n    <\/div>\n<!--\/themify_builder_content-->\n","protected":false},"excerpt":{"rendered":"<p>Statutory audit of public-interest entities It aims to improve transparency in the audit market to strengthen public confidence in the annual and consolidated financial statements of public-interest entities (PIEs). It does so by laying down rules on: audits of public-interest entities; organisation and selection of statutory auditors and audit firms to guarantee their independence and [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[126],"tags":[],"_links":{"self":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts\/12357"}],"collection":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/comments?post=12357"}],"version-history":[{"count":2,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts\/12357\/revisions"}],"predecessor-version":[{"id":18653,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts\/12357\/revisions\/18653"}],"wp:attachment":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/media?parent=12357"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/categories?post=12357"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/tags?post=12357"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}