European Parliament’s ECON Committee hosts Steven Maijoor to present ESMA report on Wirecard
On 3 December, ESMA’s outgoing (from March 2021) Chair Steven Maijoor attended an EP’s Committee on Economic and Monetary Affairs (ECON) hearing to give an overview of the main conclusions of ESMA’s peer review report on Germany’s supervision of financial reporting in the Wirecard case.
At the hearing, Mr. Maijoor presented the main recommendations from the report, but warned against drawing too many general conclusions from the investigation of a specific case (Wirecard) in a specific country (Germany). However, he contended that in the areas of information exchange between authorities some general improvements could be made in Europe. Moreover, he suggested the possibility of making ESMA’s soft guidelines on enforcement of financial reporting into a legal obligation (level 2 legislation under EU law). ESMA would present its thinking on these matters in January 2021, he indicated. Mr Maijoor also expressed his personal opinion on concerns about conflicts of interest in the audit sector.
Investors call on Europe’s largest companies to deliver ‘Paris-aligned’ accounts
The Institutional Investors Groups on Climate Change (IIGCC) wrote to the 36 largest European companies to share their expectations for directors and auditors to deliver accounts that properly reflect the impact of getting to net zero emissions by 2050. The call is accompanied with their Investor Expectations report and sets out five clear steps companies must take when preparing ‘Paris-aligned’ accounts:
- an affirmation that the goals of the Paris Agreement have been considered in drawing up the accounts
- adjustments to critical assumptions and estimates
- sensitivity analysis
- divided resilience
It also outlines specific expectations for auditors to call out where accounts are ignoring material climate risks and whether or not the accounts can be considered Paris-aligned. Read more
In addition – but independently from IIGCC’s call – International Financial Reporting Standards (IFRS) Foundation published educational material to highlight how existing Standards require companies to consider climate-related matters when their effect is material to the financial statements. It is aimed to support the consistent application of IFRS Standards; it does not add to or change the requirements in the Standards. Read more
In 2021, CEAOB plans to look into risks related to fraud and going concern and developments on Brexit
Following its last 2020 Plenary meeting, the CEAOB shared its 2021 Work plan and subgroups activities.
The programme highlights, for example, the likely existence of a higher risk of default and fraud resulting from covid-19 leading to a higher level of expectation towards auditors and their supervisors. CEAOB also intends to look at developments related to Brexit and potential consequences for national competent authorities and the CEAOB. Read more
In addition to the first point above, the Inspection subgroup underlines that it will put a special focus in the next 12 to 18 months on the increased risks. In particular, this relates to going concern and fraud aspects and how the audit firms have taken actions to respond to these risks. Read more
Mr. Maijoor also expressed his personal opinion on concerns about conflicts on interest in the audit sector.
The 2014 EU audit legislation ‘has had mixed results’ according to the latest Audit Analytics’ report
Audit Analytics (AA), a US independent provider of audit intelligence, suggests that the 2014 EU audit legislation has had only a limited positive impact on independence and concentration of auditors, while coming at some cost.
AA presents this conclusion in their latest report: ‘Monitoring the audit market in Europe’. The focus is set on the concentration in the audit market and the impact of mandatory audit firm rotation and prohibitions of non-audit services on the market structure. Read more (after entering your email address)