The European Parliament has adopted in plenary session the amended Directive on Statutory Audit and the Regulation on specific requirements regarding the statutory audit of public-interest entities (PIEs). The new framework will cover all statutory audits required by EU law.
Key measures in the proposed new legal framework for statutory audit include:
- Public-interest entities will be required to change their statutory auditors after a maximum engagement period of 10 years.
- Audit firms will be prohibited from providing certain non-audit services to the PIEs they audit, including tax advice and services linked to the financial and investment strategy of the audit client. The Regulation introduces a list of non-audit services that statutory auditors and audit firms will notbe able to provide to the audited entity, to its parent undertaking and to its controlled undertakings within the EU (the so-called “black list”), in order to avoid situations where the independence of statutory auditors or audit firms could be compromised. Examples of services covered by the “black list” include:
- Specific tax, consultancy, and advisory services to the audited entity.
- Services that involve playing any part in the management or decision-making of the audited entity.
- Services linked to the financing, capital structure and allocation, and investment strategy of the audited entity.
The new rules will establish a cap on the fees generated for non-audit services to PIEs.
The new rules prohibit restrictive “Big Four only” clauses.
[LTN 67, 8/4/14]