Implementing the New EU Audit Framework

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2 FRTAP workshop for public oversight and quality assurance institutions Implementing the New EU Audit Framework 9-10 June 2015 at the AOC in Berlin Introduction: FRTAP Since 2009, the Financial Reporting Technical Assistance Program (FRTAP or the Program) has supported new Member States in their endeavors to put in place sustainable regulatory and institutional frameworks which adequately implement the acquis communautaire in the field of corporate sector financial reporting; properly monitor and enforce the application of the acquis in practice; and provide necessary education and training of individuals responsible for those tasks. The Program has focused on: institutional design and capacity strengthening to ensure proper oversight, monitoring, and enforcement of the acquis; auditor oversight and quality assurance; and development of tools, methodologies, and training curricula for oversight, monitoring and enforcement, which goes beyond generic training on IFRS and ISA. Objective of this Workshop The objective of the workshop is to continue supporting the FRTAP countries in their implementation of the acquis as it relates to auditing and audit oversight. Specifically, the workshop will provide participants with an opportunity to discuss the additional obligations and funding requirements particularly for the competent authority resulting from the new EU audit framework comprising the new Audit Directive and Audit Regulation including: clarifying and understanding the implications of the new audit framework; comparing and sharing implementation strategies and funding options with their peers for the new regulatory framework; and planning for further regional and national activities and assistance both with and without the FRTAP to enable successful implementation of the new audit framework by 17 June 2016 when it comes into force. Presenters and Participants This workshop will convene representatives from audit public oversight and quality assurance institutions in FRTAP countries together with guests from other EU member states. Representatives will be those who play a key role in strengthening their audit frameworks, including those considering the policy implications of alternative revisions and responses to the new audit framework, preparing draft laws, managing audit regulatory authorities, and implementing auditor oversight and quality assurance systems. Note: It is understood and agreed by all participants that comments made during this workshop reflect the views and understanding of the individual speakers, are not intended to reflect an official or public position of their respective countries or authorities, and are subject to change as each country develops and finalizes its response to the Audit Directive and Audit Regulation. 1

3 Tuesday, 9 June :30 Registration and Coffee 09:00 Welcome and opening remarks, discussion of agenda 09:15 Key new requirements for competent authority for audit POS Jerry Decker, CFRR will present some key new requirements for the competent authority for Public Oversight Systems (POS) introduced by new EU audit framework comprising the new Audit Directive and the new Audit Regulation both of which come into force on 17 June Topics will include requirements for governance/structure of the competent authority; qualifications of quality assurance inspectors; delegation by the competent authority; and other issues. 09:45 Country presentations of plans to implement the new requirements for competent authority for audit POS Moderator: Andrei Busuioc, Centre for Financial Reporting Reform, World Bank Each country delegation (Germany, Poland, Czech Republic, Netherlands, Slovenia, Hungary, Slovakia, UK) to present the current status of their plans to implement the new audit framework addressing the following matters: the size of the audit market by reference to the number of entities and PIEs obliged to prepare annual audited financial statements and the number of auditors the institutional arrangements and responsibilities for transposing the new EU audit framework funding plans or options being considered for the reform and ongoing operation of the public oversight system the main elements of the implementation plan including timings and responsibilities the main options selected in respect of location and members of competent authority assignment and delegation of oversight tasks to public oversight bodies, other entities and professional bodies. planned development of new work methodologies and processes planned in-country consultation and advocacy including with the press, the profession, PIEs, investors, competent authorities of PIEs, academia, and other interested parties 10:30 Coffee Break 2

4 11:00 Country presentations of plans to implement the new requirements for competent authority for audit POS ~ Continued ~ 12:30 Lunch 13:30 Open discussion 1: issues relating to the competent authority Moderators: Andrei Busuioc, Centre for Financial Reporting Reform, World Bank Ranjan Ganguli, Centre for Financial Reporting Reform, World Bank Country delegations will discuss the six main issues relating to the competent authority as identified in the country presentations. These could include: Problems in securing adequate and stable funding including explaining and persuading decisions-makers of the needs and value of audit oversight for funding purposes Strengths and limitations of housing the oversight body in a ministry, the securities regulator, in a self-standing body, or elsewhere Engagement with stakeholders to help assure support for a strong and adequatelyfunded system Designation of single competent authority Appropriate composition of the Board to help assure effectiveness, visibility, and sustained support Assignment and delegation of oversight tasks to public oversight bodies, other entities and professional bodies Development of new work methodologies and processes 15:30 Coffee Break 16:00 Open discussion 1: issues relating to the competent authority ~ Continued ~ 17:00 End of Day 1 18:30 Participants dinner 3

5 Wednesday, 10 June :30 Morning coffee Speakers: John Grewe, UK Financial Reporting Council Jon Grant, Consultant 09:00 EU and international developments Moderator: Ranjan Ganguli, Centre for Financial Reporting Reform, World Bank John Grewe will present EU and international developments. This will include, from the EU perspective, a discussion of the role of the CEAOB as well as the EU adoption of ISAs (and how differences between them will be handled). Jon Grant will present the activities of European Audit Inspection Group (EAIG) including its development of Common Audit Inspection Methodologies (CAIM) for ISQC1 and audit engagements. 09:30 Open discussion 2: other issues relating to the competent authority Moderators: Andrei Busuioc, Centre for Financial Reporting Reform, World Bank Ranjan Ganguli, Centre for Financial Reporting Reform, World Bank Country delegations will discuss other issues relating to the competent authority as identified in the country presentations. These could include: Challenges of recruiting, retaining, and training qualified quality control inspectors, and alternative approaches Handling review of specialized audits (eg, financial services, insurance, extractive industry), use of experts, and funding for experts Public reporting by POS Sanctions scheme including adopting EU-wide common minimum standards Interaction with other national regulatory bodies 11:00 Coffee Break 4

6 11:30 Open discussion 3: Managing audit framework options Speakers: John Grewe, UK Financial Reporting Council Jon Grant, Consultant Moderator: Ranjan Ganguli, Centre for Financial Reporting Reform, World Bank John Grewe will present the main factors affecting the UK s selection of options available under the new Audit Directive and Audit Regulation. Jon Grant will share the matrix developed to help record, coordinate and track the available options. 12:30 Lunch 13:30 Open discussion 4: preparing the audit profession to implement the new EU audit framework Speaker: Jon Grant, Consultant Moderator: Andrei Busuioc, Centre for Financial Reporting Reform, World Bank Jon Grant will briefly describe and contrast the new requirements in terms of a statutory auditor s audit process and reports under the new EU audit framework with those currently in force. New format statutory audit reports for PIEs Engagement quality reviews (EQRs) prior to issuance of statutory audit report Separate auditors reports to audit committees Separate auditors reports to competent authority supervising the PIEs Transparency reports Country delegations will discuss their strategies and steps to prepare the audit profession to implement and comply with the requirements of the new EU audit framework. 5

7 14:30 Open discussion 5: preparing PIEs to implement the new EU audit framework Speaker: Hassan Outaklla, Netherlands Authority for Financial Markets Moderator: Hassan Outaklla, Netherlands Authority for Financial Markets will briefly present the obligations imposed on PIEs by the new EU audit framework: Audit fees: o 70% cap on non-audit services to PIEs o Prohibition of certain non-audit services to PIEs o Maximum of 15% of total fees from a single PIE Audit reports: o New format statutory audit reports for PIEs o Separate auditors reports to audit committees o Separate auditors reports to competent authority supervising the PIEs Strengthening audit committees Appointment and rotation of auditors o Tendering o 5% of shareholders may initiate action to dismiss an auditor o Mandatory rotation of auditors Country delegations will discuss their strategies and steps to prepare PIEs to implement and comply with the requirements of the new EU audit framework as well as their approach to monitoring compliance. 15:30 Coffee Break 16:00 Planning for future FRTAP community activities to help support implementation of the new EU audit framework Moderators: Andrei Busuioc, Centre for Financial Reporting Reform, World Bank Country delegations will consider and provide feedback to the workshop on activities, research papers and invited experts who might be able to help support implementation of the new EU audit framework. 16:30 Closing session and feedback Moderator: Andrei Busuioc, Centre for Financial Reporting Reform, World Bank 6

8 17:00 End of Workshop 7

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