On 27 May 2014, the directive amending the Statutory Audit Directive and a new regulation regarding the statutory audit of public interest entities were published in the Official Journal. The legislation will come into force 20 days later. The regulation will apply in member states from 17 June 2016, other than the prohibition on "Big Four only" contractual clauses (Article 16(6)), which will apply from 17 June 2017. Member states will be required to adopt the necessary measures to implement the directive by 17 June 2016.
The legislation is aimed at addressing the weaknesses highlighted in the European audit system following the 2008 financial crisis. Key elements of the regulation include:
- prohibition on contingent fees and a 70% cap on fees for non-audit services;
- prohibition of the provision of non-audit services;
- increased disclosure requirements for the auditor's report (including who appointed the audit firm, the date of appointment and period of total uninterrupted engagement, including previous renewals and reappointments of the statutory auditors or the audit firms); and
- prohibition on "Big Four only" contractual clauses regarding the appointment of statutory auditors or audit firms.
Key elements of the directive include:
- amended provisions on the auditor's independence and objectivity and organisation of the auditor and the audit work;
- clarification of the scope of the statutory audit; and
- a European passporting regime to enable auditors to exercise their profession across Europe.
The legislation is available at:
http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L:2014:158:FULL&from=EN
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.
