1. Simplifying auditing standards for small or non-complex entities – Exploring possible solutions
Confidence in smaller companies’ performance benefits us all. Especially since they contribute more to the EU economy than large enterprises do. An audit of financial statements (hereafter: audit) can instil such trust as auditors check if historical financial information is reliable.
But should auditing a small or non-complex entity with e.g. 20 employees follow the same standards as a large company with 50,000 people? The current International Standards on Auditing (ISAs) have become too complex for the needs of smaller entities because audit regulators and standard setters focus on protecting capital markets. However, since smaller entities are major contributors to growth, they must not overlook them when dealing with auditing standards.
As the difficulties of applying the ISAs in this environment become more apparent, the status quo is not an option. This Cogito publication explores different solutions to help the IAASB find an efficient way to deal with small or non-complex entity audits. We aim to open the debate, so all stakeholders can work towards a way forward on this strategic issue.
Read here: Simplifying auditing standards for small or non-complex entities (publication)
2. Definition of Public Interest Entities in Europe
What is the definition of Public Interest Entities (PIEs) across Europe and what has changed with the new EU rules on statutory audit that became applicable in June 2016?
This paper presents the results of a survey we carried out on this topic across Europe. It follows our previous survey from 2014 on the definitions of PIEs. We provide an overview of the PIE definitions applicable across European countries and the differences amongst them. In addition, we provide insight into the number of PIEs in each country.
The findings of this survey demonstrate that the Audit Reform has resulted in more harmonised and reduced definitions of PIEs. This has led to an overall decrease in the number of PIEs across Europe.
Read here: Definition of Public Interest Entities in Europe
3. Auditor’s role in fighting financial crime – Standing up to fraud, corruption and money laundering
Financial crime is harmful and has far reaching negative consequences. An audit of financial statements (hereafter: Audit) may help counter such crimes of fraud, corruption and money laundering.
This information paper aims to clarify the role of statutory auditors in standing up to such crimes. Their role is defined by auditing standards and by specific legislation. These responsibilities also draw on ethics and professional scepticism, part of the principles that all statutory auditors need to adhere to.
Combatting fraud, corruption and money laundering must be a joint effort of all relevant parties, including business leaders, the accountancy profession, regulators, standard setters and the financial sector. We call for a coordinated approach and commitment of all the key players to achieve tangible results.
Read here: Auditor’s role in fighting financial crime
4. How to respond to assurance needs on non-financial information
How do professional accountants respond to the growing demand for assurance on non-financial information (NFI)?
Stakeholders use NFI as an input to their decision making, but they want to know if this information can be trusted. External assurance can strengthen their confidence in the reliability of NFI.
Professional accountants are well-equipped to provide such assurance, as they employ their experience in financial reporting, their knowledge about assurance techniques, and are bound by professional standards.
This discussion paper sets out the context of NFI reporting and assurance, regarding market demand, regulation, and the role of the accountancy profession. Then it provides the 6 key steps for professional accountants to follow while conducting an assurance engagement on NFI. Each of the 6 steps contains ‘Items for discussion’.
Read here: How to respond to assurance needs on non-financial information
5. Core & More: An opportunity for smarter corporate reporting
This paper elaborates on the Core & More concept that Accountancy Europe introduced in our thought-leadership paper The Future of Corporate Reporting – creating the dynamics for change (2015). Stakeholders’ responded positively to this idea and asked us to further explain the Core & More concept.
Core & More aims to present corporate reporting in a smarter way, organising financial and non-financial information based on the interests of users. Information relevant for a wide range of stakeholders would be in the Core report, and supplementary details for a more limited audience would form the More reports.
This paper develops the concept further and provides ideas on what information could be presented in each of the pillars. We explore how technology might support the Core & More concept, especially in the context of an online report. The paper also addresses the relationship between Core & More and the Integrated Reporting initiative, as well as the need to foster innovation.
This paper is part of Accountancy Europe’s contributions to improving corporate reporting.
Read here: Core & More: An opportunity for smarter corporate reporting
6. Member State implementation of EU NFI Directive
In 2014 the European Commission published the EU Directive on Non-financial and Diversity information, with a deadline for Member States to transpose it into national law until December 2016. Following the transposition period there now exists a range of reporting requirements across the 28 Member States.
CSR Europe and GRI, in collaboration with Accountancy Europe, decided to collect information on Member State implementation to enable dialogue on the topic across Europe. The result is a comprehensive overview of how Member States are implementing the Directive. Initially launched at a joint event in Brussels on 22 November 2017, the overview is regularly updated and available below.
Read here: Member State implementation of EU NFI Directive
7. Reporting key audit matters in the EU banking sector – Analysis and good practice examples
Audit quality is vital for people to be able to rely on company information and have trust in markets. Communicating key audit matters (KAMs) in the auditor’s report is a relatively recent requirement to support the quality of audits. Auditor’s reporting of KAMs responds to the growing demand of investors and stakeholders for more transparency and insight in the audit process.
The banking sector is a pillar of EU economic growth and auditors are now producing more informative and insightful reports to contribute to the sector’s public trust and stability.
Our survey provides insights on auditor’s reporting on KAMs for more than 60 European banks. It aims to facilitate communication between banks, auditors and stakeholders on this important new requirement.
Read here: Reporting key audit matters in the EU banking sector
8. Rediscovering the value of SME audit
This information paper reports on the current developments in Sweden and Denmark, where national authorities are assessing the consequences of exempting small and medium-sized enterprises (SMEs) from mandatory audit.
SMEs are crucial for the functioning and growth of the EU economy, representing 99,8% of all non-financial companies. Audit ensures that a company’s financial information is reliable, which is indispensable to instil confidence and trust in this part of the economy. However, policy-makers seem to focus on audit of large or listed companies rather than SMEs. In some countries such as Sweden and Denmark, they have even introduced an audit exemption for SMEs.
Sweden has just evaluated the impact of abolishing the SME audit requirement, concluding that this reform was unsuccessful as its costs outweigh the benefits. This has prompted Denmark to start a similar investigation. These countries’ empirical facts-based approach is a good practice of sound policy-making. We encourage all policy-makers to follow such an approach and to consider the benefits of SME audit.
Read here: Rediscovering the value of SME audit
9. Accountancy profession’s contributions to the EU sustainable finance strategy
The EU’s transition to a low-carbon, resource-efficient and sustainable economy has benefits for us all. The financial system has a critical role to play in this process, by ensuring that the economy contributes to long lasting welfare.
Professional accountants are crucial in building a comprehensive sustainable financial system. This publication provides our contributions to the European Commission’s sustainable finance strategy. We focus on the three areas where we can contribute most:
- corporate reporting to accommodate long-term horizons
- disclosure requirements to address investors’ needs
- accounting frameworks to be in line with long-term investments
We call on the EU institutions to open up the dialogue with private sector stakeholders and we invite organisations with similar interests to join the debate on sustainable finance.
Read here: Accountancy profession’s contributions to the EU sustainable finance strategy
10. Organisation of the public oversight of the audit profession in Europe
Enhancing companies’ credibility through audit ensures that stakeholders make informed decisions based on these companies’ financial statements. In parallel, public oversight ensures audit quality.
The revised EU statutory audit rules significantly impact how the public oversight of statutory auditors and audit firms is organised. Designated public oversight bodies have the ultimate responsibility for the oversight of the audit profession. They can delegate certain tasks to other authorities and professional bodies.
This survey presents the impact of the new rules. Our findings show that the national public oversight bodies now carry out many activities previously in the competence of the professional bodies.
This survey also provides an overview of how the public oversight is organised in each of the 28 EU Member States, Iceland and Norway, i.e. composition, funding, transparency and key activities of the national public oversight bodies and delegation of tasks to other bodies.
This publication is based on the input of our members and it is part of a series of work done by Accountancy Europe on the new rules on statutory audit. It follows up on our 2015 survey Organisation of the public oversight of the audit profession in 23 European countries.
Read here: Organisation of the public oversight of the audit profession in Europe