Presentations DG XV

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• Establishing Public Oversight Systems of the
  Audit Profession
• REPARIS Workshop
• Vienna, 15 March 2006
• Jean-Philippe Rabine

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• This document was prepared solely for the
  purpose of informing participants to the March
  2006 Reparis Forum.
• The views expressed herein only represent the
  personal views of the author, and cannot be
  considered whatsoever as representing those of
  the European Commission.

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Structure of the presentation

• Directive on Statutory Audit status of adoption
• Main features of a Public Oversight system
  independence
• Public Oversight
• Quality Assurance
• Cooperation inside the EU (EGAOB)
• International dimension

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Modernisation of the Eighth Directive

• Directive of 1984 will be replaced
• A comprehensive, principles based new Directive
• Timing
• Commission proposal March 2004
• Council general approach 7 December 2004
• Single reading with the EP 28 September 2005
• Agreement by ECOFIN Council 11 October 2005
• Possible formal adoption Spring 2006
• Transposition by Member States into national
  law 24 months spring 2008

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Main features of a Public Oversight System

• KEY ISSUES
• Getting away from a self-regulated system
• A  system , comprised of  competent
  authorities , abiding by key principles
• Ability to establish a dialogue with foreign
  counterparts
• KEY FEATURES
• governed by a majority of non-practitioners
  (independent from the audit profession,
  transparent nomination procedure )
• ultimate responsibility for the oversight of
• the approval and registration
• the adoption of standards (including auditing)
• continuous education, quality assurance and
  investigative and disciplinary systems
• right to conduct investigations
• funding for the public oversight system must be
  secure and free from any undue influence

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Main features of a Public Oversight SystemPublic
Oversight Body

• ABILITY TO ESTABLISH A DIALOGUE WITH FOREIGN
  COUNTERPARTS
• One body at State level represents the system
• EU level EGAOB
• International level

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Main features of a Public Oversight
SystemQuality Assurance System

• KEY ISSUES
• Consistent high quality of all statutory audits
  required by Community law enforcement
• Regular inspections
• Independent review (getting away from peer
  review)
• KEY FEATURES of the  SYSTEM 
• Independent
• Organisation
• Funding
• Selection procedure of inspectors
• Regular at least every 6 or 3 - years
• Quality knowledgeable experienced inspectors,
  inspections based on testing of audit files, a
  report is communicated to the inspected firm
  and followed-up, sanctions
• Transparent annual report

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EU co-ordination public oversightEGAOB

• New Advisory and Co-operative Group (Dec 2005)
• To be distinguished from the future Auditing
  Regulatory Committee
• Group composed of representatives of public
  oversight bodies from all Member States
• No practitioners / about 8 meetings per year
• No CESR type committee, but Commission group
  (Commission chairs and provides secretariat)

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EU co-ordination public oversightEGAOB

• Main tasks
• Exchanging best practices
• Technical assessment of third countries
• International standards on auditing
• Possible advice on future comitology measures
• 3 subgroups
• Cooperation
• Scoreboard
• ISA

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International dimension

• Registration of individual auditors and audit
  firms in Member States only if third countrys
  rules on independence and on auditing standards
  equivalent
• Derogation in the case of equivalence of the
  third country public oversight systems
• Access to audit working papers
• Transfer via the national competent authorities
  only
• Adequacy of working arrangements assessed by the
  Commission

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Further information

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