Audit Policy Update

• Our webinar on implementing ESEF: Opportunities, challenges & way forward
• European Parliament holds hearing on Wirecard
• Council believes EU Member States should be allowed to postpone ESEF requirements
• UK: Big Four’s fees for non-audit work for audited entities continue to decline
• Dutch government issued a plan of action for future improvement in the accountancy sector

Implementing ESEF: Opportunities, challenges & way forward

Accountancy Europe hosted a webinar on the implementation of the European Single Electronic Format (ESEF) on 12 October. The scope of the debate covered the opportunities, challenges and practical considerations about ESEF reporting and assurance.

ESEF should be implemented from 2021, and there is an ongoing work by various stakeholders to be ready in time. Our webinar supported these efforts with the aim to contribute to an efficient and effective implementation.

Our guests presented insights on ESEF reporting and assurance. A panel discussion followed, starting with a question: ‘Are we ready for ESEF?’

Read the highlights of the event and watch the recording here.

European Parliament holds hearing on Wirecard

On 7 October, European Parliament’s (EP) Plenary held a hearing on Wirecard. The hearing was attended by the European Commission’s (EC) Executive Vice-President Dombrovskis and the German European affairs minister Michael Roth.

European Union (EU) financial market supervision dominated the debate. Dombrovskis, and various MEPs alike called for stronger European supervision, whilst Mr. Roth emphasised the need to also look into the role of auditors. He argued that conflicts of interest in the audit sector would have to be investigated.

Several MEPs also criticised EY and auditors broadly, urging for reviewing the functioning of EU audit rules and hinting at operationally splitting the firms.

Dombrovskis underlined that the results of ongoing investigations on Wirecard, as well as on the role of supervisors and auditors, would need to be looked at before any follow-up measures are taken. The EC plans to publish two reports on EU audit market as well as on the functioning of the EU audit legislation.

Mairead McGuinness appointed as Commissioner in charge of financial services

The former Irish centre-Right MEP and Vice-President of the EP, Mairead McGuinness, has been appointed as the Commissioner in charge of DG FISMA and the EC’s financial services portfolio, including audit legislation. She replaces Valdis Dombrovskis, who in turn moved to become the Commissioner in charge of trade.

On 2 October, McGuinness was question by the EP’s Committee on Economic and Monetary Affairs (ECON), and on 7 October the EP consented to her appointment. During her ECON appearance, McGuinness notably committed to fostering capital market integration in Europe and emphasised the need to thoroughly investigate what happened in the Wirecard case.

Council believes EU Member States should be allowed to postpone ESEF requirements

The Council of the EU adopted its position on several issues related to the recovery from the COVID-19 pandemic. It noted that Member States should be allowed to postpone the application of ESEF requirements by one year.

As a next step, the EP will have to form its own position and the ECON vote for this is scheduled for 19 November 2020. After the ECON vote, the EP and the Council will need to reach a final agreement. Read more

Dutch government issued a plan of action for future improvement in the accountancy sector

The Dutch Ministry of Finance released its action plan of the quartermasters for the future of the accountancy sector. The plan aims to improve the quality of statutory audits and revolves around five topics:

• Driving and monitoring coherence and progress
• Audit Quality Indicators
• Structure models
• Culture change
• Improving quality

With regards to the last point, there will be specific attention in the audit towards fraud, forensic expertise and (dis)continuity of an audited entity.

The implementation of the plan is expected by end of 2023.

Read more (available in Dutch)

Big Four’s fees for non-audit work for audited entities continue to decline in the UK

Fees for audit work at the largest UK companies increased in 2019 as audit quality improvements continue to be a major focus. This comes as one of numerous findings of the UK Financial Reporting Council’s (FRC) 2020 report Key Facts and Trends in the Accountancy Profession.

The report also states that the Big Four’s fees for non-audit work for audited entities declined by 20,8% in 2019, revealing a positive market shift ahead of operational separation by 2024.

In addition, it declares that the total number of members of the accountancy bodies in the UK and Ireland continued to grow steadily for the period 2015 to 2019.

Read more

The UK FRC consultation on auditing standard for the auditor’s responsibilities relating to fraud

The FRC has launched a consultation on the proposed revision of its auditing standard ISA (UK) 240 – The Auditor’s responsibilities Relating to Fraud in an Audit of Financial Statements.

Proposed revisions include enhancements of the requirements in several areas such as:

• Risk assessment procedures
• Responses to the assessed risks
• Communications to management and those charged with governance

The consultation period ends on 29 January 2021.

Read more