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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 Entity (PIE) audit committee members, PIE auditors and other PIE stakeholders.

Legislative changes have taken effect 17 June 2016.

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 EU Regulation focuses exclusively on PIEs and mainly covers:

  • 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.

Both the Directive and the EU Regulation came into effect 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), however, the provisions of SI no. 312 of 2016 are now included in the Companies (Statutory Audits) Act 2018 which was signed into law 25 July 2018 and commenced 21 September 2018 with the exception of section 9 and paragraphs (a), (h), (i) and (j) of section 3(1).

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.

Diarmaid O'Keeffe

Partner Head of Audit

Diarmaid is a Partner and is the Firm’s Head of Audit.

Diarmaid provides audit and assurance services to the firm’s domestic and international Financial Services clients, including aircraft leasing, international technology companies, structured finance vehicles and funds.  Diarmaid also leads the provision of the Firm’s advisory services to Irish and international retail banks.

Diarmaid works with the Firm’s corporate clients on pension’s compliance, financial reporting, risk management, internal and external audit and regulatory matters.

As Partner on engagements with both the Central Bank of Ireland and the National Asset Management Agency (“NAMA”), Diarmaid has extensive experience undertaking multiple asset, governance, due diligence and business plan reviews.


Tel: +353 1 2933 441

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