Update

Audit Policy

 Cannot read this email? Open in your browser.December 2019 
 

Audit Policy Update

December 2019

 
 
 
 

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Highlights

 
 
 
 
  • CEAOB publishes work programmes for 2020, new guidance on ESEF and auditor rotation
  • Restoring public faith in auditing will require action from many players, but above all from the audit firms
  • UK: Audit market reviews have resulted in increased inquiries for non-Big 4 firms
  • Netherlands: AFM issues a report on audit quality in PIEs
  • Germany: Decline in number of firms registered as auditor
 
 
 
 
 

EU Developments

 
 
 
 

CEAOB publishes 2020 work programmes, new guidance on ESEF and mandatory auditor rotation

The Committee of European Auditing Oversight Bodies (CEAOB) has issued the following documents:

2020 work programmes and 2021 outlook of 5 CEAOB sub-groups which include their priorities, planned projects and other activities like outreach:

Guidelines on auditors’ involvement on financial statements in ESEF

The European Single Electronic Format (ESEF) is the new single electronic reporting format for the issuance of annual financial reports. It applies to annual reports to be published by issuers whose securities are admitted to trading on a regulated market in the European Union for financial years beginning on or after 1 January 2020.

Guidelines on duration of the audit engagements

The 2014 EU Audit Regulation Statutory established mandatory auditor rotations for auditors of Public Interest Entities (PIEs). This measure aims to address the familiarity threat and reinforce the independence of statutory auditors.

The newly published CEAOB’s Q&As on practical matters related to rotation might be useful for auditors as well as audited entities.

 
 
 
 
 

International Developments

 
 
 
 

Building a culture of challenge in audit firms

Restoring public faith in auditing will require action from many players, but above all it will require action from the audit firms themselves. This is the primary focus of the paper: What can audit firms do to reclaim their position of responsibility in society? The paper describes what it takes to build a culture of challenge within an audit firm. Read more

 
 
 
 
 

National Developments

 
 
 
 

UK: Audit market reviews have resulted in increased inquiries for non-Big 4 firms

As a result of the audit market reviews’ proposals, the non-Big 4 firms have noted an increase in audit inquiries from large companies. Representatives from Mazars and BDO mentioned that the increase has been unprecedented. Read more

UK: FRC chairman calls for break-up of Big 4 accountants

The new chairman of Financial Reporting Council (FRC) has called on the government to break up the Big 4 accounting firms. The chairman believes that enforced separation of audit and consulting in the Big 4 firms is a critical measure to improve audit quality. He has also started working on the Kingman recommendations that do not require government action. Read more

UK: Deloitte hands control over UK auditor pay to its non-executive directors

Deloitte has given a final say over the pay and bonuses of its auditors to its non-executive directors. The action aims to prevent the perception of conflict of interests between its audit and consulting departments and avoid a forced split of the multidisciplinary company. Read more

Netherlands: CTA’s final report deadline postponed to February 2020

The Committee for the future of accountancy sector (CTA) is looking into the audit market in the Netherlands with the ultimate aim to improve audit quality. To enable more factfinding and research, the deadline for CTA’s final report has been postponed to 1 February 2020.

Netherlands: AFM issues a report on audit quality in PIEs

The Dutch Authority for the Financial Markets (AFM) has published a report on quality of audits of Public Interest Entities (PIEs). During the assessment period, 8 audit firms held a PIE auditing license. Currently, only the Big 4 audit firms, BDO and Mazars have this licence.

The AFM’s assessment focused on PIE auditors other than Big 4. The report indicates that audit quality in these firms needs improving. Read more

Germany: Decline in number of firms registered as auditor

The Chamber of German Public Auditors (WPK) has issued a publication analysing the German audit market. It is the first study since mandatory rotation came into force. Key findings include:

  • Decline in number of firms registered as auditor in Germany – from 3699 in 2016 to 3230 in 2018
  • More and more firms are joining networks
  • 40 auditor changes seen in auditors for capital markets
    • 18 within Big 4
    • 4 within medium-sized firms
    • 7 from medium-sized firms to Big 4
    • 11 from Big 4 to medium-sized firms

Read more (this report is available only in German)

 
 
 
 
 

Events

 
 
19/11/2019
 
Digital Day 2019: Storify and Digitalisation awards - Accountancy Europe
 

This curated content was brought to you by Júlia Bodnárová, Accountancy Europe Senior Advisor since 2017. You can send her tips by email and connect with her on LinkedIn.

 
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