BACKGROUND NOTE ON ACTION PLANS Action Plans are developed by IFAC members and associates to address policy matters identified through their responses to the IFAC Compliance Self-Assessment Questionnaires. They form part of a continuous process within the IFAC Member Body Compliance Program to support the ongoing development and improvement of the accountancy profession around the world. Action Plans are prepared by members and associates for their own use based on the national frameworks, priorities, processes and challenges specific to each jurisdiction. As such, they will vary in their objectives, content and level of detail, consistent with their differing national environments and stages of development, and will be subject to periodic review and update. Refer to the Part 1 Assessment of the Regulatory and Standard-Setting Framework Questionnaire and Part 2 SMO Self- Assessment Questionnaire for background information on each member and associate their environment and existing processes. These responses may be viewed at: http://www.ifac.org/complianceassessment/published_surveys.php Use of Information Please refer to the Disclaimer published on the Compliance Program website. ACTION PLAN IFAC Member/Associate: Approved by Governing Body: Original Publish : September 2009 Last Updated: August 2012 Next Update: August 2013 Status as of of Publication Page 1 of 11
GLOSSARY AOC CPD HGB IAASB IAESB IASB IDW IES IESBA IFRS WPO Auditor Oversight Commission Continuing Professional Development German Commercial Code (Handelsgesetzbuch) International Auditing and Assurance Standards Board International Accounting Education Standards Board International Accounting Standards Board Institut der Wirtschaftsprüfer International Education Standards International Ethics Standards Board for Accountants International Financial Reporting Standards Wirtschaftsprüferkammer German Public Accountant Act (Wirtschaftsprüferordnung) GENERAL: Action Plans by IFAC Members in Germany This Action Plan reflects the SMO activity areas where has primary responsibility (SMOs 1, 4 and 6). Please refer to the Action Plan prepared by Institut der Wirtschaftsprüfer (IDW) for information about other SMO activity areas (SMOs 2, 3, 5 and 7). Status as of of Publication Page 2 of 11
Action Plan Subject: Action Plan Objective: SMO 1 - Assurance Further development of the existing Assurance System # Start Actions Completion Background The is the state supervised organization of all public accountants (Wirtschaftsprüfer WP and vereidigte Buchprüfer vbp) and firms of public accountants in Germany. It was established in 1961 as a non-profit corporation under public law. All public accountants and firms of public accountants in Germany are mandatory members of. acts in the capacity of indirect state administration in the areas of, inter alia, examination, licensing and registration, revocation of licenses, disciplinary oversight, quality assurance and adoption of professional rules. operates under the state supervision of the Federal Ministry of Economics and Technology and the public oversight of the Auditor Oversight Commission (AOC). Effective January 1, 2005, the oversight of the AOC covers all remits of the in relation to those members, who are entitled to carry out statutory audits or who do so de facto without being entitled. In those cases, AOC has the ultimate responsibility. The AOC comprises non-practitioners who are independent of the profession. 7 th Amendment of The German Public Accountant Act (Wirtschaftsprüferordnung - WPO) 1. Completed In accordance with the EU Statutory Audit Directive (2006/43/EC), statutory auditors of public interest entities are required to have a quality assurance review performed every three years, whereas all other statutory auditors are required to have it performed every six years. 2. Completed is entitled to engage in disciplinary action in response to weaknesses identified in the quality control system of a statutory auditor from sources other than the quality assurance review. 3. Completed Implementation of an inspection system concerning public accountants and audit firms that carry out statutory audits of public interest entities according to Section 319a Paragraph 1 Sentence 1 of the German Commercial Code (Handelsgesetzbuch HGB). In addition to the regular quality assurance reviews, the may perform inspections without indication of any misconduct. The cycle for inspections depends on the number of audit engagements (25 and more engagements: annual; less than 25 engagements: triennial). Findings of inspections may result in disciplinary sanctions. AOC AOC Status as of of Publication Page 3 of 11
# Start Actions Completion Maintaining Processes (Member Notification, Education and Promotion Activities) 4. 2008 Further amendments of the German Public Accountant Act (Wirtschaftsprüferordnung-WPO) concerning, inter alia, quality assurance, inspections and investigations are currently suspended due to the discussions on EU level. Legislator Legislator 5. Publication of a legal commentary (approx. 1200 pages) on the professional law on public auditors in Germany with a focus on quality assurance and quality control. First edition was published in July 2008. Second edition is planned for 2013. 6. Annual report on procedures and sanctions imposed by the and courts in relation to quality assurance and quality control. Two former presidents of Assurance Essentially Technical (interdepartmenta l) and an honorable judge of the Higher Regional Court Berlin (Disciplinary Court) 7. Periodical publication of decisions leading to reprimands and professional and legal proceedings and explanatory articles regarding quality assurance in `s member journal. 8. Annual presentations of important changes in quality assurance system and main issues regarding quality assurance for members. 9. Members of the Assurance conduct training sessions for statutory auditors and quality assurance reviewers during professional events., Assurance Assurance, Assurance and Executive Status as of of Publication Page 4 of 11
# Start Actions Completion 10. Development of policies by the Assurance, including, but not limited to: - Policy on the quality assurance reviewer s report. (Latest amendment March 24, 2011.) - Policy on the performance of quality assurance reviews under special consideration of small practitioners. (Latest amendment October 12, 2011.) Assurance 11. Prior to a quality assurance review, the Assurance provides special requirements to the quality assurance reviewer regarding certain review topics. Assurance Review of s Compliance Information 12. The IFAC self-assessment questionnaires and this Action Plan will be reviewed periodically and updated as necessary by the staff responsible for the relevant area of activity. Status as of of Publication Page 5 of 11
Action Plan Subject: Action Plan Objective: SMO 4 IESBA Code of Ethics Ensure ongoing alignment of ethics standards in Germany with IESBA Code of Ethics # Start Actions Completion Background Our organization has developed our own ethical requirements with a process to eliminate differences between our ethical requirements and the International Ethics Standards Board for Accountants (IESBA) Code. The IESBA Code was incorporated by reviewing the Code of Ethics against our organization's by-laws and incorporating the IESBA Code requirements where necessary. These processes are supervised by the Auditor Oversight Commission (AOC) - an independent public oversight (for further information, please refer to the background notes of SMO 1) - and are subject to the approval of the Federal Ministry of Economics and Technology. In addition to the specified ethics contained in the by-laws of, ethical requirements are abstractly set first and foremost by the Federal Legislator in the Commercial Code (Handelsgesetzbuch) and in the Public Accountant Act (Wirtschaftsprüferordnung). Both laws form the basis for the by-laws of and take priority. While the Commercial Code applies to all parties involved but contains only independence rules as ethicsrelevant provisions and those only for statutory auditors, the Public Accountant Act also covers non-statutory audit services but applies only to members of the profession and determines the specific framework for the by-laws of. Application of the Code of Ethics Standards 13. January 2005 Reviewed Code of Ethics and alignment of the provisions of s Professional Charter regarding independence requirements with the content and structure of the IESBA Code of Ethics. Completed Advisory Board together with a Committee ( and Technical (Department 14. 2006 Minor adoption of some other remaining provisions of the IESBA Code of Ethics as part of s Professional Charter. 15. 2010 Review of the IESBA Code of Ethics 2009 - in consideration of IESBA s Clarity Project reformatting the Code of Ethics - against the background of a possible need of adapting s Professional Charter or other relevant laws and provisions accordingly. Completed Expected 2012/2013 Advisory Board Advisory Board together with a Committee ( and Technical (Department together with a Committee ( and Technical (Department Status as of of Publication Page 6 of 11
# Start Actions Completion Action Plan Developed by Maintaining ongoing processes (Member notification, Education and Promotion Activities) 16. Publication of a legal commentary (approx. 1200 pages) regarding the professional law on public auditors in Germany with the main focus on professional duties and ethics standards. The first edition was published in July 2008. The second edition is planned for 2013.. Two former presidents of Essentially (interdepartmental) and an honorable judge of the Higher Regional Court Berlin (Disciplinary Court) 17. Encouraging the awareness and the application of the IESBA Code of Ethics by publishing elaborate annotations on terms and concepts of the IESBA Code in s Professional Charter. 18. IESBA Committee pronouncements and revisions to the IESBA Code are communicated to s members on a timely basis. In addition, produced case study and explanatory material regarding specific issues of ethical and professional conduct and corresponding publication in s quarterly member journal. Report important matters in news flash on s Website, so as to inform members as to the main issues raised. Committee (Professional Law) together with a Committee ( and Technical (Department (Department 19. Technical Support for s members by responding to their oral and written inquiries on technical matters in relation to ethics (including a telephone service). 20. 2009 German translation of the IESBA Code of Ethics published; s members were informed accordingly. Completed Head of Department (Professional Law) and Principal Translator (Department Committee (Professional Law) together with (Department Professional Law) 21. Participation in IESBA s activities, particularly responding to IESBA s Exposure Drafts by issuing comment letters. also attends official meetings of IESBA as an Observer and participates in the National Head of Department (Professional Law) (Department Status as of of Publication Page 7 of 11
# Start Actions Completion auditing standard setters (NSS) meetings of IESBA. In this context, agenda papers are reviewed and significant issues identified in order to present them for discussion both on IFAC- and national level. Jointly with the IDW in 2012 the submitted a highly qualified and experienced representative of the German profession for nomination to membership in the IESBA for the term beginning 2013. Action Plan Developed by 22. Engage in a continual dialogue with the Legislator and several Ministries, particularly Federal Ministry of Economics and Technology and Ministry of Justice, to spread the spirit of the Code of Ethics and contribute to the legislative processes using the special expertise of the profession. In addition, participation in several other working groups to ensure that the ethic pronouncements of IFAC are taken into consideration. Executive and Technical 23. Annual fixed dates on which regular meetings and presentations of important issues regarding professional duties and ethics standards are held for members.. and Executive Review of s Compliance Information 24. The IFAC self-assessment questionnaires and this Action Plan will be reviewed periodically and updated as necessary by the staff responsible for the relevant area of activity. Status as of of Publication Page 8 of 11
Action Plan Subject: Action Plan Objective: SMO 6 - Investigation and Discipline Further Development of the Disciplinary Oversight # Start Actions Completion Background The rules for the investigation processes and discipline of misconduct of public accountants in Germany are set out in the Public Accountant Act (Wirtschaftsprüferordnung), which is a federal law of Germany, and s Professional Charter (a by-law). The concept of the disciplinary oversight is a two-tier system. is in charge of all violations except for (potential) severe misconduct, i.e. criminal activity, intentional or severe breaches of professional duties and acts likely to bring the accountancy profession into considerable disrepute. The severe cases are subject to disciplinary jurisdiction by court - a division of the District Court Berlin is responsible for all cases in Germany. The charges are brought to court by the Chief Public Prosecutor after own investigations. operates under the supervision of the independent public Auditor Oversight Commission (AOC) and the Federal Ministry of Economics (for further information, please refer to the background notes of SMO 1). 7 th Amendment of The German Public Accountant Act (Wirtschaftsprüferordnung - WPO) 25. Completed Extension of investigation instruments, e.g. s right to enter and inspect premises and offices, to inspect documents and to transcript or copy documents. 26. Completed Expansion of competence regarding professional jurisdiction by court. 27. Completed Increased fines imposed in connection with reprimands. 28. Completed Right to silence of the suspect public auditor applies only to oral information but does not affect the obligation to provide documents. 29. Completed The AOC may perform inspections without indication of any misconduct (see SMO 1),and performs investigations when there is an initial suspicion of misconduct. AOC AOC Status as of of Publication Page 9 of 11
# Start Actions Completion Maintaining Processes (Member notification, Education and Promotion Activities) 30. Further amendments of the WPO concerning disciplinary oversight, including investigations are currently suspended due to the discussions at EU level. Legislator Legislator 31. Publication of a legal commentary (approx. 1200 pages) regarding the professional law on public auditors in Germany also relating especially to investigations. First edition was published in July 2008. Second edition is planned for 2013. Two former presidents of Essentially Technical ( interdepartmental) and honorable judge of the Higher Regional Court) 32. Periodical publication of decisions in relation to reprimands and legal and professional proceedings and explanatory articles regarding professional duties and investigations in the `s member journal. 33. Annual report on procedures and sanctions imposed by the AOC/ and by the disciplinary court. Moreover a report on the content and the results of the review of annual and consolidated accounts is published annually. AOC/ 34. Annual presentations of important changes in system and main issues regarding disciplinary oversight. 35. Technical support for `s members by responding to their oral and written inquiries on professional duties in relation to investigations (including a telephone service). 36. Engage in a continual dialogue with the Legislator and several Ministries, particularly Federal Ministry of Economics and Technology and Ministry of Justice, to contribute to the legislative processes using the special expertise of the profession. Head of Department (Disciplinary Oversight) and Executive Executive and Technical Status as of of Publication Page 10 of 11
# Start Actions Completion Review of s Compliance Information 37. The IFAC self-assessment questionnaires and this Action Plan will be reviewed periodically and updated as necessary by the staff responsible for the relevant area of activity. Status as of of Publication Page 11 of 11