Update

Audit Policy

 Cannot read this email? Open in your browser.June 2020 
 

Audit Policy Update

June

 
 
 
 

SME auditor brings good governance to charities

 
 
 

Read how an auditor is helping charities adhere to good governance.

 
 
 
 
 

Coronavirus resources for European accountants

 
 
 

Our online hub gathers resources and initiatives on coronavirus across the EU.

 
 
 
 

Highlights

 
 
 
 
  • Publication: Coronavirus’ impact on ongoing audits
  • Accountancy Europe calls on the IAASB to achieve progress towards a draft standard for auditing less-complex entities
  • Setting up for high-quality non-financial information assurance in Europe
  • Accountancy Europe responds to IESBA proposals related to auditor’s independence
  • UK: BDO becomes second largest auditor of listed UK companies
 
 
 
 
 

Feature story

 
 
 
 

Coronavirus’ impact on ongoing audits

Our latest publication focuses on how the coronavirus outbreak impacts business environment and it aims to support European auditors in adapting their work on ongoing audits. To this end, we have analysed corona crisis related auditing guidance, issued by global institutions, national regulators and professional institutes. We highlight the main matters for auditors in 4 categories:

  • auditor’s identification and assessment of risks
  • auditor’s response to assessed risks
  • auditor’s report and communication
  • auditor’s involvement related to government support

This paper supplements our previous publication Coronavirus’ impact on auditing for 2019 year-ends and beyond. As the situation evolves, we keep collecting new guidance on our webpage Coronavirus resources for European accountants

 
 
 
 
 

Our other recent work

 
 
 
 

Accountancy Europe calls on the IAASB to achieve progress towards a draft standard for auditing less-complex entities

Accountancy Europe sent a letter to the International Auditing and Assurance Standards Board (IAASB), ahead of its crucial meeting, calling for progress towards a draft standard for auditing less-complex entities (LCEs).

This is especially urgent as:

  • we have observed increasing audit thresholds in Europe
  • countries have started developing their own LCE audit standards
  • the corona crisis has put LCEs/SMEs at heightened going concern risks and auditors need fit–for–purpose standards to be able to bring credibility to suppliers or lenders using their accounts

We believe in using the existing ISA framework to draft a standard that is no longer too complex for LCEs’ needs as the current ISAs are. This will ensure consistent audit approaches globally.

During its meeting in the week of 15 of June, the IAASB decided to move forward with both workstreams as suggested in this agenda paper from the meeting:

  • ISA focused workstream
  • separate standard workstream

Setting up for high-quality non-financial information assurance in Europe

Non-financial information (NFI) is vital for companies and stakeholders to make sound business decisions. It makes environmental, social and governance impacts transparent to support moving to more sustainable economies.

As the importance of NFI is growing, stakeholders also need to know if the information can be trusted. Independent, external assurance enhances the reported NFI’s reliability, strengthens confidence in markets and contributes to the global sustainable finance objectives.

Our new publication explores 3 conditions to develop and ensure high-quality NFI assurance:

  • EU regulatory framework mandating assurance
  • professional standards applicable to all assurance service providers
  • public oversight of assurance service providers

Read more

Response to the European Commission’s consultation on the Non-Financial Reporting Directive revision

We have responded to the European Commission’s (EC) public consultation on the Non-Financial Reporting Directive (NFRD) revision. In our response, we highlight the following to the EC:

  • A common comprehensive NFI standard is necessary to achieve high quality information and to tackle current issues in NFI reporting
  • Expand scope beyond public interest entities based on significance of the impact on the environment and society
  • Material disclosures as part of the management report
  • Mandate assurance across the EU
    • Apply gradual approach, but there should be the same level of assurance over NFI as for financial information
    • Define the subject matter within the NFRD

Read more

 
 
 
 
 

EU Developments

 
 
 
 

European Parliament calls on the Commission to address ‘quasi monopoly’ of Big Four

On 18 June, the European Parliament (EP) Plenary adopted its non-binding own-initiative report on EU competition policy.

During the vote, the Plenary also adopted an amendment (see here nr. 45) tabled by Renew Europe Group as a whole, arguing that there is a ‘quasi monopoly’ of the audit market dominated by the Big Four. The amendment calls on the European Commission (EC) to separate audit from consulting services and to set up mandatory joint audits.

The amendment passed by a huge margin of 528 in favour, 95 against and 74 abstentions.

Although the EP’s report and the amendment are non-binding opinions, they do demonstrate the current mood in the EP.

 
 
 
 
 

International Developments

 
 
 
 

PCAOB issues six largest U.S. firm inspection reports

The Public Company Accounting Oversight Board (PCAOB) issued the 2018 inspection reports for the six largest U.S. audit firms in a new, redesigned format.

This new inspection report format streamlines the report’s content to enhance readability. It also includes new information not previously communicated in inspection reports to enhance transparency, which is one of the PCAOB’s strategic goals.

An analysis carried out by Audit Analytics notes that overall, the number of inspections has been declining over the years. However, the percentage of audits that were considered to be deficient has been relatively steady since 2012, remaining between 35 and 40%. On average, the PCAOB has found about two issues per deficient inspection.

Read more

IAASB issues illustrative examples for ISA 540 (Revised) implementation

The IAASB issued illustrative examples for auditing accounting estimates. This is an implementation guidance which does not amend, extend or override the requirements of ISA 540 (Revised) Auditing Accounting Estimates and Related Disclosures. The two examples given illustrate how an auditor could address certain requirements of ISA 540 (Revised) for simple and complex accounting estimates, respectively.

Read more

Accountancy Europe responds to IESBA proposals related to auditor’s independence

Accountancy Europe submitted its comment letters to IESBA for Proposed Revisions to the Non-Assurance Services (NAS) Provisions of the Code and for Proposed Revisions to the Fee-related Provisions of the Code.

See the comment letter on NAS and the comment letter on fees.

 
 
 
 
 

National Developments

 
 
 
 

UK: BDO becomes second largest auditor of listed UK companies

Following the shake-up in the audit sector, BDO has increased their market share and now audits the second-highest number of listed entities in the UK. It is the first time a mid-tier auditor has been in second place for listed client numbers. The rise suggests a shift in boardroom attitudes.

Read more

 
 
 
 
 

Other news

 
 
Construction News
 
Carillion liquidator hits KPMG with negligence claim
 
Accountancy Daily
 
Audit firms failing on quality monitoring
 
Financial Times
 
EY overhauls UK leadership and splits audit governance
 
 
 

Events

 
 
30/06/2020
 
Europe's economic recovery from Covid19 - 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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