Accountancy Europe commented on the European Commission’s proposed regulation concerning DORA
In our comment on the proposed regulation on digital operational resilience for the financial sector (DORA), we suggest to the EC to perform a cost/benefit analysis to justify the decision for scoping-in auditors. We also suggest to clarify whether the proposed scope has captured entities faced with significant information and communication technology (ICT) risks.
If the EC concludes to include auditors in the scope, it remains to clarify whether:
- all auditors should be included, considering that most auditors are not involved at all in the financial sector. We believe that only auditors who audit core financial service providers that fall in the scope of DORA should be concerned
- how the proportionality principle should apply to them
Reviewing the audit framework could strengthen the powers of national supervisors
In a reply to a question of Member of the European Parliament (MEP) Carmen Avram (S&D/Romania), the EC announces that it is closely monitoring the developments of the Wirecard case.
The EC will also consider recent publications to base its decision to review the audit market framework. If those analyses conclude that EU requirements about supervision of auditors should be strengthened, a review of the audit framework could include strengthening the powers of national supervisors and/or of relevant European-level bodies.
The publications upon which the EC will base its decision include the:
- assessment of the effectiveness of the EU audit framework
- 2021 EC’s audit market monitoring report
- outcome of the national investigations and of the fast-track peer review of the German Federal Financial Supervisory Authority (BaFin) published by the European Securities and Markets Authority (ESMA)
The European Commission specifies its upcoming evaluation of the audit framework
The EC has replied to a question raised by Catalonian MEPs about concentration of audit firms and market distortion on 7 January. It declares that there had been no changes to market concentration despite the audit reforms to increase competition, as concluded by the 2017 market monitoring report and as the 2021 market monitoring report confirms. The EC’s forthcoming evaluation of the audit framework will focus on audit quality, auditor independence and enhancing competition.
The EC is also launching a study to assess the impact of the Audit Directive and Regulation. This, together with the recent market monitoring report, the ESMA fast-track peer review and the results of ongoing investigations into the Wirecard case, will feed into EC’s review of the audit framework.
Member States discuss Wirecard
The EU Council’s Financial Services Committee (FSC) held a meeting to discuss various financial services topics, including Wirecard on 20 January. During the meeting, the EC presented its analytical work on Wirecard and discussed aspects such as corporate governance, auditing, supervision and enforcement with the Member States’ representatives.
On audit, Member States’ views were apparently divided related to expanding auditors’ auditing requirements, increasing their liability and audit market concentration measures.
Member States take action on the one-year delay of ESEF
The EP and Council agreed to grant the EU Member States the option to delay by one year the application of the European Single Electronic Format (ESEF) requirements on 11 December 2020.
The uncertainty at national level perseveres, as the EP and the Council still need to ratify the delay-option before it takes legal effect.
We have been monitoring national regulatory developments related to ESEF and identified several Member States that found practical solutions to mitigate the burden on the issuers created by this uncertainty. Those measures greatly help issuers in preparing their 2020 annual financial reports.
Read more on our ESEF Collected Guidance webpage