1. Agreed Positions on Audit Policy

2. Taking audit policy forward  As needs of society, markets & stakeholders evolve, auditors have to reflect on their role, their added value and their need to change.  The debate on audit policy is welcomed:  In the long-term the discussion is in the collective interest of the entire profession and in the public interest at large;  We can contribute as we are independent of the firms, area of practice or EU Member States.

3. Various proposals are welcomed improvements (1)  These are proposed measures that are aimed at modernising the current audit framework and advancing audit policy, in particular:  Measures enhancing the performance of the audit;  EU adoption of International Standards on Auditing (ISAs) for all statutory audits;  Development of the role of audit committees;  Improvement of the governance of audit firms;  The ban of contractual clauses limiting choice of auditors;  Improvement of the coordination of audit oversight on European level;

4. Various proposals are welcomed improvements (2)  Promoting the creation of a single market for audit services: This is, however, difficult because of remaining divergences in certain parts of Member States’ legislation  Member States should continue to be able to decide whether they want to exempt small undertakings from audit requirements:  As Member States are best placed to determine their needs based on the principle of proportionality, size of their companies, characteristics of their economy and their tax assessment and inspection systems.

5. Auditor’s communication can be improved  Proposals on auditors’ communications go in the right direction but the legislative debate needs to improve them or make them more practicable and useful:  As far as more information provided in the public audit report is concerned, some of it will be useful to users of the financial statements, other information required is too prescriptive;  An internal audit report by the auditor to the audit committee should increase its involvement and knowledge: Its distribution should, however, be limited to the board and not to all of the General Assembly.

6. The value of audit relies on independence and expertise (1)  The EC proposals are overly restrictive regarding independence and are likely to reduce the depth and breadth of expertise that stakeholders demand. They could also adversely affect audit quality:  The idea of breaking large professional firms into audit-only firms will be detrimental to the quality of all audits as much needed expertise will be lost and attracting high quality talent more difficult;

7. The value of audit relies on independence and expertise (2)  The limitation of the provision of non-audit services to all PIE audit clients will reduce the firms’ ability to develop multi-competence skills and knowledge also useful for the audit of complex businesses;  The adoption of the robust International Code of Ethics is recommended;  Limiting the provision of related financial audit services for all PIEs to less than 10% of the total audit fees is impracticable in the light of supervisory and regulatory demands: The limitation of such services does not serve the public interest and will need to be amended significantly.

8. Solutions to stimulate a more vibrant audit market have pros and cons  The objective of enhancing choice in the audit market is valid but the solutions proposed by the Commission also have undesirable effects  Many consider mandatory rotation of audit firms would increase concentration;  Rotation every 6 years will be counterproductive and could potentially impact on audit quality.

9. Transforming the profession into an overregulated industry will destroy value  The Proposed Directive excludes professional accountancy bodies from any other activity than the registration and approval of auditors:  Professional bodies: Underpin continued development of the profession; Enhance quality; and Instil independence for all professionals but especially for SMPs. This important function could well be lost under the proposals.  Many Member States rely on the expertise, experience and resources of professional bodies to control the firms’ audit quality – will this be available in the future?;  The proposals transform our profession into a regulated industry thus affecting the values and discipline a professional institute instils in its members.