Summary of responses presented on 10 th February 2011 by the European Commission in Brussels Annual...
30
Summary of responses presented on 10 th February 2011 by the European Commission in Brussels Annual seminar in Berlin – 27 th May 2011 1
-
Upload
loraine-powell -
Category
Documents
-
view
212 -
download
0
Transcript of Summary of responses presented on 10 th February 2011 by the European Commission in Brussels Annual...
Summary of responsespresented on 10th February 2011by the European Commission
in Brussels
Annual seminar in Berlin – 27th May 2011 1
688 replies received
Annual seminar in Berlin – 27th May 2011 2
599 European replies
Annual seminar in Berlin – 27th May 2011 3
48 non-European replies
Annual seminar in Berlin – 27th May 2011 4
Identity of respondents
Annual seminar in Berlin – 27th May 2011 5
407 replies from Chartered Accountants
Annual seminar in Berlin – 27th May 2011 6
145 replies from companies
Annual seminar in Berlin – 27th May 2011 7
22 replies from users
Annual seminar in Berlin – 27th May 2011 8
Global summaryExpectation gap confirmed : need more
explanations about what an audit is intended for
« Societal » role of auditor recognised
No need to redefine this function
Legal framework not sufficient to safeguard auditor independence
« Big » does not mean « superior quality »
Annual seminar in Berlin – 27th May 2011 9
Role of the auditor according to the profession
The purpose of an audit is not the financial health of the entity, but to express an opinion on the financial information provided by management.
To develop information given by the company.
Quality of the audit threatened by : Reduction of the report’s production period Reduction of fees
Annual seminar in Berlin – 27th May 2011 10
Role of the auditor according to the investors
Expectation for more information from the Auditor, but without any extension of his role
Request on going concern validations and fair value valuations
Explanation of the tasks realised
Reinforce scepticism, namely by reducing the amount of junior staff per audit partner
Not sign off simply because statements comply with accounting standards
Annual seminar in Berlin – 27th May 2011 11
Role of the auditoraccording to public authorities
Role limited to assurance concerning historical information, but not financial situation and forecasts
Explain the methodology in the report to reduce the expectation gap
Reinforce scepticism
Annual seminar in Berlin – 27th May 2011 12
Role of the auditor according to academics
Few added value to expect from an auditor report : form dominates over substance
More transparency is needed on audit quality by regulators and oversight bodies
Communicate about the content of tasks
Annual seminar in Berlin – 27th May 2011 13
Role of the auditor according to companies (1)
Opposition of an extension of the report to financial health
Develop communication between auditors and internal controllers
Limit the role to a risk based approach
Audit methodology to be better explained, but not in the audit opinion
Annual seminar in Berlin – 27th May 2011 14
Role of the auditor according to companies (2)
Revisit the report language : works realised, justification of the opinion and responsibility of the auditor, but not in favour of a « long » report (Germany)
Opposed to the role of the auditor in the environmental report (=>experts)
Annual seminar in Berlin – 27th May 2011 15
International Standards on Auditing (ISAs)
Quite broad support for their adoption, without increasing requests on small entities
Enable modifications because of national legislation
Introduce ISQC1 standard on quality control, already widely applied
Globalisation of ISAs acceptable if applied also in the USA
Annual seminar in Berlin – 27th May 2011 16
International Standards on Auditing (ISAs)
Critics on governance of IAASB : lack of professionals (according to the
profession) Conflicts of interest (according to
companies) Need of flexibility due to the lack of a larger
European representativeness
Request for an adaptation to SMPs and SMEs
Annual seminar in Berlin – 27th May 2011 17
Appointment of AuditorsCode of Ethics sufficient to address any
potential independence risk
Reject of an appointment by third parties, except from control authorities to avoid conflicts of interest
Involvement of Audit Committees in choices
Request for a fixed scale of fees
Dumping practice for other services
Annual seminar in Berlin – 27th May 2011 18
Rotation
Reject of mandatory firm rotation
Risk on quality, and costs increase
Limitation of engagement for Public Interest Entities (PIEs) (10 years ?)
Request for a fixed period of 5-7 years
Annual seminar in Berlin – 27th May 2011 19
Non-audit servicesaccording the profession
Vast majority of replies against the prohibition
Big4 : justify the services by a best knowledge of the entity
SMPs : in favor of services but only for SMPs
Limits to be found for PIEs
Annual seminar in Berlin – 27th May 2011 20
Non-audit services according to investors
Services to be forbidden if not linked directly to the audit service.
Safeguard measures to be implemented to avoid conflicts of interest.
Establish an exhaustive list.
Openness on extent, content and cost of these services.
Annual seminar in Berlin – 27th May 2011 21
Non-audit services according to public authorities
Services useful to knowledge of the entity and audit quality
Against the prohibition
Interested by exhaustive list
Decision of the audit committee for the PIEs
Annual seminar in Berlin – 27th May 2011 22
Non-audit services according to academics
Prohibition = best guarantee for independence
Necessary to the auditor’s image towards third parties : appearance of independence
Advisory services are not used to improve the audit quality but to reduce the audit cost.
At least decision of the audit committee with a limit to 25 % of fees
Annual seminar in Berlin – 27th May 2011 23
European oversight
General trend in favour of the reinforcement of the EGAOB in a role of coordination at the European scale, as well as supervision.
Annual seminar in Berlin – 27th May 2011 24
Systemic riskaccording to the profession
No, according the Big4, providing that the auditor’s responsibility is limited
Yes, according to other auditors, as the choice is often even less than 4 (uncompliances, not appoint the competitor’s auditor)
Nasty oligopoly system because too influential
Annual seminar in Berlin – 27th May 2011 25
Systemic risk
Risk confirmed by investors, control authorities, enterprises and academics.
Too concentrated market, lack of competition.
Commission urged for a sustainable audit market, necessary to strengthen confidence and stabilise markets.
Annual seminar in Berlin – 27th May 2011 26
Audit firm consortiaaccording to the profession
France mentioned as an example to be examined as a too big concentration of supply has been avoided in comparison with the other states.
Can dynamise the market but be careful with audit cost and quality.
Big4 against.
Other auditors very favourable if service shared with « non-systemic firm »
Annual seminar in Berlin – 27th May 2011 27
Audit firm consortia
Investors quite against, fearing an increase of costs of audits.
Control authorities request an EU regulation, namely for differences in opinion between consortium members.
Enterprises are not against but fear the cost : mandatory for listed companies and optional for the other ones.
Annual seminar in Berlin – 27th May 2011 28
SMEs simplified auditProposition quite widely rejected
Limited audit = confusion
An audit is an audit
Adaptation of requests to entity size required by the profession
Rather exempting from audit than lightening the service
Enterprises against SMEs audit
Annual seminar in Berlin – 27th May 2011 29
Thank you for your attention
Annual seminar in Berlin – 27th May 2011 30
