EisnerAmper Ireland | EU Audit Reform Ireland

EU Audit Reform

EU Audit Reform – What you need to know:

EU Audit Reform aims to improve audit quality and restore investor confidence.  It imposes new requirements on Public Interest Entities (PIEs) directors, stakeholders and their auditors.

As of 17 June 2016 legislative changes will apply to the audit market. For stakeholders of PIEs there are a number of imminent actions that will need to be considered ahead of this date.

Legislative Framework

The European Union (Statutory Audits) (Directive 2006/43/EC, as amended by Directive 2014/56/EU, and regulation (EU) No. 537/2014) Regulations 2016, SI no. 312 of 2016.  These Regulations give effect to (i) Directive 2014/56/EU (“The Directive”) of the European Parliament and of the Council of 16 April 2014 amending Directive 2006/43/EC on statutory audits of annual accounts and consolidated accounts and (ii) certain provisions of Regulation (EU) No 537/2014 (“The EU Regulation”) of the European Parliament and of the Council of 16 April 2014 on specific requirements regarding statutory audit of public-interest entities and repealing Commission Decision 2005/909/EC.

The primary objective of the amendments is to reinforce investor confidence in the truth and fairness of financial statements published by European companies.

The Directive mainly covers:

• definitions of key stakeholders (i.e. PIEs, Audit Firms, Competent Authorities, etc.);
• European adoption (and process thereof) of International Standards on Auditing;
• establishing Competent Authorities at a Member State level;
• the structure and role of Audit Committees for PIEs; and
• an extension of the range of stakeholders who can call for the dismissal of auditors.

The EU Regulation contains a series of additional requirements that relate to the statutory audits of PIEs (entities incorporated in an EU Member State whose transferable securities are listed on a regulated market of any Member State of the EU, Credit Institutions, Insurance Undertakings, or entities deemed by Member States to be PIEs), this includes;

• Companies with equity listings
• Irish funds with prices listed on the Main Securities Market (MSM)
• Irish debt vehicles / SPVs listed on the MSM
• Banks, insurers and reinsurers

An EU regulation is automatically law in a Member State requiring no action from Member State governments to be legally effective.

The primary objective of the EU Regulation is to enhance public confidence in the financial statements of PIEs, and hence contribute to the orderly functioning of markets through greater integrity and efficiency of financial statements.

The changes focus exclusively on PIEs and mainly cover:

• Mandatory rotation of Audit Firms by all PIEs after 10 years (subject to certain transitional arrangements).
• Blacklisted services – the Statutory Audit Firm is not permitted to provide directly or indirectly to the audited entity, to its parent undertaking or to any of its controlled undertakings within the EU, any of the listed prohibited non-audit services.
• Audit committees – the Directive and the regulations reinforce the role of the audit committee by expanding its responsibilities in ensuring the quality of the audit being performed.

How can EisnerAmper Ireland help?

As one of only 8 Irish PIE auditors, EisnerAmper Ireland provides the specialist services to help you get compliant:

• We undertake the audit where rotation is required;
• We offer non-audit services (incl. tax) where your incumbent auditor is restricted; and
• We advise on the actions necessary to meet your EU Audit Reform responsibilities.

Both the Directive and the EU Regulation will become applicable on the 17 June 2016.

A copy of the European Union (Statutory Audits) (Directive 2006/43/EC,  as amended by Directive 2014/56/EU, and regulation (EU) No. 537/2014) Regulations 2016, SI no. 312 of 2016 is available here: S.I. No. 312 of 2016 (pdf).

Frequently Asked Questions – EU Audit Reform

If you are a Public Interest Entity (PIE) and are required to issue a tender, click here for a helpful checklist to assist with the selection criteria.