Most Read Contributor in Luxembourg, February 2017
Following regulation that became effective this year, how should
audit committees ("ACs") be involved in the tender
process? Keep reading for part 3 of our 6-part series about how to
make sure you're in good shape with regard to the law of 23
July 2016 on the audit profession and Regulation (EU) N°
Step 3 – How should the AC be involved in the tender
Step 4 – What is the specific role of the AC in terms of
Step 5 – What kind of relationship should the AC maintain
with the external auditor?
Step 6 – What should the additional report of the external
auditor to the AC include?
In this article, we focus on step 3.
All public interest entities ("PIE"s) have to tender
when required – there is no exception to the rule.
When is a tender process required?
This procedure takes place for new appointments of any statutory
auditor. In particular, this means:
the selection of a new auditor (first
the re-appointment of an existing
auditor at the end of the initial maximum duration period of 10
However, as opposed to the appointment of a new auditor, the
simple reappointment of an existing auditor does not require the
tender process to be carried out.
How should the AC be involved in the tender process?
The AC now has explicit responsibility for recommending a
statutory auditor to the supervisory body of the entity. This
recommendation must include at least two possible choices for the
audit engagement and a justified preference for one of them.
Recommendation of the AC
The AC must ensure that transparent, non-discriminatory
selection criteria are used. It must furthermore formally document
the various criteria its members considered (e.g., geographical
coverage, industry expertise or audit inspection results) in
deciding which firms to invite to tender. Invitations to tender
should not be restricted. A PIE is free to invite any audit firm to
submit a proposal and should not exclude smaller audit firms (a
list is to be made public by the CSSF). Some companies will opt to
publish a formal request for proposal.
Small and medium-sized enterprises and companies with reduced
market capitalisation are not required to apply the selection
criteria when conducting their tender process.
Proposal to the general meeting ("GM") of
The proposal by the management to the GM for the appointment of
statutory auditors or audit firms shall include the recommendations
and preference of the AC.
The management's proposal can differ from the preference of
the AC if the following conditions are met:
the proposal justifies the reasons
for not following the recommendation of the AC; and
the auditor recommended by the
management has participated in the selection procedure.
What are the practical considerations for ACs?
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.
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As the banking industry continues to be shaped by technological and regulatory forces, we’ve gathered our European Central Bank (ECB) experts to hold a conference about this changing landscape. KPMG’s ECB desk from Frankfurt will join our Luxembourg banking partners to unpack the latest news from the ECB, including regulations that will affect the future of banking.
We would be very pleased if you could attend this event, which will be held at our Luxembourg headquarters in Kirchberg on 30 March. The talk will begin at 5:00pm and last until 6:00pm, at which point the evening will be turned over to a networking session with drinks.
Please let us know if you are able to attend by using the registration button above (by 27 March, if possible).
We look forward to seeing you there!
Here in Luxembourg, LPEA are holding an event which will offer new initiatives by bringing General Partners (GPs) and Limited Partners (LPs) together to examine and speak on the industry from the “360” perspective, leaving no stone unturned. We are a sponsor of the event, as well as having a speaker present. David Capocci, Partner and Head of Alternative Investments will be offering his own insight on the industry nowadays.
Many Free Zone Companies incorporated in DMCC, DWC and JAFZA are leaving themselves exposed to potential fines and the non-renewal of their trading licence for failure to comply with one particular regulatory requirement.
With European governments needing to increase their tax collection, the Organisation for Economic Co-operation and development and other organisations are looking to standardise the reporting and filing of annual financial statements for companies across the world.
As your business reflects on both the changing shape of the Solvency II timetable and the eventual move to a new IFRS standard for insurance contracts, how can a durable platform for regulatory and financial reporting in the future?
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