Audit Policy Update

• Our new publication: Dynamics influencing auditor choice in the Public Interest Entity market 
• CEAOB submits report on EU audit legislation reform to European Commission  
• IFIAR’s 2022 Report on annual survey of audit inspection findings

Our new publication: Dynamics influencing auditor choice in the Public Interest Entity market

Auditing public interest entities (PIEs), ranging from banks and large international companies to smaller and more locally listed companies, requires significant resources and skills and is highly regulated. Having a diverse and resilient audit market with enough audit firms active in it is crucial and in the public interest. It ensures that all PIEs’ and their stakeholders’ needs are served, and PIEs can choose their auditor primarily based on quality.  

The limited choice of audit firms and concentration in the PIE audit market are interlinked topics that have been attracting a lot of attention from stakeholders such as academics and policymakers. This publication aims to contribute to the debate focusing on the aspect of auditor choice, by looking at all parties that play a role in this market – companies, including their audit committees and shareholders, auditors, policymakers and audit supervisors.  

In particular, we aim to: 

• provide insight to policymakers about the dynamics and challenges in the PIE audit market that have led to its current structure and to the PIEs’ limited choice of audit firms 
• present our ideas on the potential way forward to inform the debate and serve as a basis for further discussion with stakeholders, including policymakers 

We urge policymakers not to underestimate the disincentives and challenges that audit firms face when attempting to move into the PIE audit market. We also invite policymakers to explore our ideas to make PIE audits more attractive. 

We plan to organise an event in 2023 to enable a public discussion amongst relevant stakeholders. 

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CEAOB submits report on EU audit legislation reform to European Commission

The Committee of European Auditing Oversight Bodies’ (CEAOB) report outlines CEAOB’s recommendations concerning the European Commission’s corporate reporting initiative. While the report itself has not been made public, the related document published on CEAOB’s website highlights the following: 

• several key priorities identified by CEAOB members 
• a list of areas where further research may provide data to support future legislative proposals 

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New consolidated versions of the EU Audit and Accounting Directives available

The consolidated version of the EU Statutory Audit Directive has been amended to include the EU Corporate Sustainability Reporting Directive (CSRD) amendments. The new version is available here. 

There is also a new consolidated version of the EU Accounting Directive, including the CSRD amendments, with a change related to the audit requirement in article (34).

Transformation of the internal auditing standards

The Institute of Internal Auditors (IIA) has released a draft of the new Global Internal Audit Standards for public comment. Stakeholders are encouraged to share their views on the new standards. The public comment period closes on 30 May 2023.  

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IFIAR’s 2022 Report on annual survey of audit inspection findings

The International Forum of Independent Audit Regulators (IFIAR) has released its eleventh annual survey of inspection findings. The survey arises from its member regulators’ inspections of audit firms affiliated with the six largest global audit firm networks. 

IFIAR Members reported in the 2022 survey that 26% of audit engagements inspected had at least one finding, compared to 30% in the 2021 survey, and down from 47% in the first survey capturing this metric in 2014. While the survey findings have shown improvement since tracking began, they also indicate the need for a sustained focus on continuing improvement. 

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State of play in sustainability assurance

The International Federation of Accountants (IFAC) published its third annual benchmarking study of global practice in sustainability disclosure and assurance.  

The study analysed whether companies report sustainability disclosures and obtain assurance. It inquired which assurance standard companies use and which provider offers assurance services.  

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