On 21 June 2016, the European Confederation of Directors Associations ("ecoDa") published new guidance on audit committees (the "Guidance"). The Guidance concerns the changes brought about by Regulation (EU) No 537/2014 on the statutory audit of public-interest entities and Directive 2014/56/EU (which amends the Statutory Audit Directive). The Guidance sets out the main changes required by EU legislation, and aims to help audit committee members understand those changes. The Guidance recommends that:
- audit committee members should come from different industries and should have diverse set of knowledge and skills;
- shareholders and the nomination committee assess the integrity of board members;
- the tender process for new auditors for public-interest entities should include small and medium-sized firms;
- the audit committee of a public interest entity parent undertaking in the EU should approve non-audit services to be provided to group entities based in the EU, however the audit committee of EU subsidiaries which are public interest entities in their own right should be involved in selecting the auditors of the parent undertaking; and
- no sanctions should be imposed on individual board members for any breach of the provisions of the legislation despite such sanctions being envisaged by the legislation because that seems to be in contradiction with the collegial spirit of the board.
The new guidance can be accessed here:
http://ecoda.org/uploads/media/ecoDa-PWC_Guidance_Audit_Committees_22_June_2016.pdf
The press release can be accessed here:
http://ecoda.org/uploads/media/Press_release_ecoDa_PwC_guidance_audit_committee21June.pdf
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
