2007 News Items
CESR publishes second extract from its database of enforcement decisions taken by EU/EEA national supervisors of financial informationMonday, 17th December, 2007: The Committee of European Securities Regulators (CESR) has today published a second extract from its database of enforcement decisions taken by EU/EEA national supervisors of financial information that participate in the European Enforcer Co-Ordination Sessions (EECS). EU/EEA national supervisors monitor and review the financial statements of issuers and consider whether they comply with IFRS and other applicable reporting requirements, including relevant national law. As proposed in CESR Standard No 2 on Financial Information, ‘Co-Ordination of Enforcement Activities’, CESR has developed a confidential database of enforcement decisions taken by individual EU/EEA national supervisors as a source of information to foster appropriate application of IFRS. In response to public comment to the Standard, CESR committed to publish extracts of the database to provide issuers and other users of financial information with similar assistance. The EECS is a forum in which all EU/EEA national supervisors of financial information, whether CESR members or not, meet to share the reasons underpinning their accounting enforcement decisions, canvas members’ views on issues currently being dealt with and to identify issues which do not appear to be covered by financial reporting standards or which may be affected by conflicting interpretations for referral to standard setting or interpretive bodies such as the IASB or IFRIC. EECS is not a decision-making forum. It neither approves nor rejects decisions taken by EU National Supervisors. Publication of enforcement decisions will inform market participants about which accounting treatments EU national supervisors may consider as complying with IFRS, i.e. whether the treatments are considered as being within the accepted range of those permitted by the standards or related interpretations. Such publication, together with the rationale behind these decisions, will contribute to a consistent application of IFRS in the European Union. Decisions that deal with simple accounting matters, or oversight of IFRS requirements, will not normally be published, even where they are material breaches leading to sanctions. Published decisions will generally include a description of the accounting treatment or presentation at issue, the decision taken by the relevant EU national enforcer and a summary of the enforcer’s underlying rationale. In response to concerns about confidentiality and privacy laws, which vary between EU jurisdictions, extracts will not usually include the name of the issuer or the enforcer or any other details that would enable the issuer or its jurisdiction to be identified. For the reasons set out above, CESR anticipates publishing further extracts from the database on a regular basis. The Irish Auditing and Accounting Supervisory Authority is a member of the EECS and is also a member of the EECS’ Agenda Group. Accordingly, in addition to contributing to the Group’s plenary meetings, the Authority has a direct input to, and involvement in: • the review of emerging cases and decisions as tabled by Member States’ enforcement authorities with a view to assessing those which should be afforded priority for consideration and discussion at the plenary; and • the review of enforcement decisions taken by EU/EEA accounting enforcers with a view to determining whether they should be published. Note: In some EU jurisdictions national supervisors may provide an opinion on a particular accounting issue before an issuer’s accounts have been finalized and published. This is not the case in Ireland). These “pre-clearance” decisions are made on the basis of information and assumptions supplied by an issuer to the relevant national enforcer. Pre-clearance decisions are identified as such in the CESR publication. The most recent material published by CESR can be accessed here Christmas Opening ArrangementsChristmas, 2007: The Authority’s offices will be open as follows for the Christmas period:
Authority publishes Guide to the Financial Reporting Requirements of the EU Transparency DirectiveFriday, 28th September, 2007: Further to the recent commencement of the Regulations giving effect to the EU Transparency Directive in Ireland, IAASA has published a Guide to the financial reporting requirements of the Directive. The Guide provides detail on:
The Guide is likely to be of particular interest to:
The Guide can be downloaded by clicking here, or hard-copies can be obtained from the Authority’s contact points. IFIAR holds its second meetingWednesday, 26th September, 2007: On 24 and 25 September 2007, independent audit regulators from 21 countries participated in the second meeting of the International Forum of Independent Audit Regulators (‘IFIAR’). The host for the meeting was the Canadian Public Accountability Board and the meeting was chaired by Jeffrey Lucy, Commissioner, Australian Securities and Investments Commission. The Financial Stability Forum, the International Organization of Securities Commissions, the Basel Committee on Banking Supervision, the International Association of Insurance Supervisors, the Public Interest Oversight Board and the European Commission were also present as observers on 24 September. Paul Boyle, Chief Executive Officer, UK Financial Reporting Council, was appointed as incoming Chairman and Prof Dr Steven Maijoor, Managing Director, Netherlands Authority for the Financial Markets, as incoming Vice Chairman Key areas for discussion at the meeting included:
Current Market Turbulence Members discussed those aspects of the current market turbulence and possibly related issues, such as those relating to valuation, contingent liabilities and consolidation, which were of particular interest to audit regulators. They agreed to consider further the issues and possible implications as they may relate to audit regulators. Drivers of audit quality and the inspection process Members continued their discussion of audit quality including drivers such as:
They discussed the importance of and the benefits from the audit inspection process and will further consider how best the inspection process might maintain and, where necessary, enhance audit quality. Exchange of information between audit regulators Members will continue to keep under review the impediments to information exchange between national regulators in relation to ongoing supervision, investigation and enforcement activities in respect of cross-border group audits and international audit networks. Issues relating to International Auditing Standards Members discussed the value of exchanging views on international auditing and ethical standards under development and their application. Audit market concentration and choice Members received reports on the steps taken in some jurisdictions to examine the issues of concentration and choice in the audit market. Foreign auditor registration Members exchanged views on the arrangements currently or shortly to be in place in a number of jurisdictions requiring the registration and/or notification of the auditors of foreign issuers. Audit inspection workshops Audit inspections remain a core area of focus for IFIAR. Following the successful workshop held in Amsterdam in May 2007 IFIAR agreed to hold a further workshop for members to provide an opportunity for the exchange of inspection techniques and experiences, and for discussing emerging issues. A working group was established to identify priorities for the next workshop, which will be held in Berlin in early 2008. Dialogue with other international organisations IFIAR will continue dialogue with other international organizations with an interest in audit quality to exchange views and to explore in which areas IFIAR might make the most effective contribution to audit quality Future role and organisation of IFIAR. Members reviewed the functioning of IFIAR over the year since it was established. They formed a task force to make recommendations to IFIAR’s next meeting in April in respect of the IFIAR’s future directions, organization, resourcing and governance. Next meeting IFIAR will hold its next meeting in Oslo in April 2008 at the invitation of Kredittilsynet-the Financial Supervisory Authority of Norway. The Irish Auditing & Accounting Supervisory Authority (IAASA) is a founder member of IFIAR. Further details regarding IFIAR, its membership and its activities can be accessed here Authority invites expressions of interest from providers of statutory financial reporting expertiseFriday, 27th July, 2007: In the context of its recently conferred responsibilities under the EU Transparency Directive, the Authority has today invited expressions of interest from suitably qualified and experienced providers of statutory financial reporting expertise. A copy of the notice of invitation can be accessed here. Further information regarding the Authority’s role under the Directive, the nature of the engagements envisaged by the Authority and the information requested of interested parties can be accessed here. Expressions of interest are requested by 31 August, 2007. ASB issues a Statement on “Half-yearly financial reports”Monday, 16th July, 2007: The Accounting Standards Board (‘ASB’) has today published a Statement entitled ‘Half-yearly financial reports’. The Statement is designed to provide guidance to Irish and UK issuers that are required or voluntarily choose to prepare half-yearly financial reports, other than those required by the EU Directive (EC) No. 2004/109 (“the Transparency Directive”) to apply International Accounting Standard (IAS) 34 “Interim Financial Reporting”. The Transparency Directive has being implemented in Ireland through a combination of primary legislation - the Investment Funds, Companies and Miscellaneous Provisions Act, 2006, and secondary legislation - the Transparency Directive Regulations, 2007 (“the Regulations”). The Regulations effectively mandate the use of this Statement for issuers not required to use IAS 34 by the requirement that such issuers should use pronouncements on half-yearly reports issued by the ASB in order to satisfy the true and fair view requirements of section 8(5)(c)(i) of the Regulations. IAASA has been designated by the Minister for Trade & Commerce as the competent authority for the financial reporting enforcement aspects of the Transparency Directive, including those aspects of the Directive relating to issuers’ obligation to prepare and publish half yearly financial reports. Changes in Authority Board MembershipThursday, 12th July, 2007: Following his retirement from the position of Chief Executive of the Irish Stock Exchange, Mr Tom Healy has stepped down from the Authority’s Board of Directors. In accordance with the provisions of the Companies (Auditing and Accounting) Act, 2003, the Minister for Trade & Commerce Mr. John McGuinness, T.D., has sought and received details of the Irish Stock Exchange’s new nominee to the Board. On foot of the foregoing, Minister McGuinness has appointed Mr. Gerard Scully to the Authority’s Board of Directors. Mr. Scully is the Head of Debt Listing at the Irish Stock Exchange. APB issues new Standard on the review of interim financial informationFriday, 6th July, 2007: The Auditing Practices Board (‘APB’) has issued a new Statement of Standards for Reporting Accountants, viz: International Standard on Review Engagements (ISRE) (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity'. The Standard is effective for reviews of interim financial information for periods ending on or after 20 September, 2007 and supersedes APB Bulletin 1999/4 'Review of Interim Financial Information'. Early adoption of the new Standard is permitted. The Standard adopts the text of ISRE 2410 which was issued by the International Auditing and Assurance Standards Board (IAASB) in July, 2005. The APB has added a relatively small amount of supplementary material, highlighted with grey shading, in order to clarify certain matters (for example in relation to the Rules and Regulations implementing the requirements of the EU Transparency Directive (‘the Directive’) applicable to UK and Irish listed companies) and to perpetuate existing APB material in Bulletin 1999/4 that remains pertinent. The Standard can be accessed on the APB’s website at www.frc.org.uk/apb . IAASA has been designated by the Minister for Trade & Commerce as the competent authority for the financial reporting enforcement aspects of the Directive, including those aspects of the Directive relating to issuers’ obligation to prepare and publish half yearly financial reports. Authority issues final Section 23 RegulationsTuesday, 26th June, 2007: The Authority has today issued final Section 23 Regulations following the completion of a detailed consultation exercise. The Regulations, which take effect immediately, supersede the Interim Regulations that were issued in January, 2007. The Regulations, which govern the conduct of Enquiries by IAASA - under section 23 of the Companies (Auditing and Accounting) Act, 2003 - into whether a prescribed accountancy body has complied with its approved investigation and disciplinary procedures, can be accessed here [redirected link to SI 667 of 2007]. The Authority has also published a Feedback Paper which summarises the issues raised by respondents during the consultation process and sets out IAASA’s responses thereto. The Feedback paper can be accessed here. Authority Launches First Annual ReportThursday, 21st June, 2007: The Authority has today launched its first Annual Report. A copy of the associated press release can be found here. Minister Martin’s press release to mark the publication of the report can be accessed on the Department of Enterprise, Trade & Employment website here. Minister for Trade & Commerce announces introduction of EU Transparency Directive RegulationsThursday, 14th June, 2007: The Minister for Trade & Commerce, Mr. Michael Ahern, T.D., has announced that he has signed into law new Regulations (Statutory Instrument 277 of 2007) implementing the EU Transparency Directive and related Regulations entitled European Communities (Admission of Listing and Miscellaneous Provisions) regulations, which take effect from 13th June, 2007 The Transparency Directive is designed to enhance transparency on EU capital markets by requiring issuers admitted to trading on a regulated market to produce periodic financial reports (annual and half yearly) along with quarterly management statements and shareholders in such companies to disclose major holdings when acquisitions or disposals cause these to reach or breach certain thresholds. The Transparency Directive also deals with the mechanisms through which this information is to be disseminated to the public and stored. IAASA has been designated by Minister Ahern as competent authority for the purpose of Article 24(4)(h) of the Directive, i.e. the supervision and enforcement of certain elements of the Directive, viz, ensuring that the Directive's periodic financial reporting requirements (annual and half yearly reports) are complied with. Changes in Authority Board MembershipThursday, 14th June, 2007: Following her recent retirement from the position of Chief Executive of the Pensions Board, Ms. Anne Maher has stepped down from the Authority’s Board of Directors. In accordance with the provisions of the Companies (Auditing and Accounting) Act, 2003, the Minister for Trade & Commerce Mr. Michael Ahern, T.D., has sought and received details of the Pensions Board’s new nominee to the Board. On foot of the foregoing, Minister Ahern has appointed Mr. Brendan Kennedy to the Authority’s Board of Directors. Mr. Kennedy is the Chief Executive of the Pensions Board. International audit regulators hold workshop on audit inspectionsFriday, 1st June, 2007: On 30 and 31 May, 2007 independent audit regulators from all 22 member jurisdictions attended a workshop on audit inspections organised by the International Forum of Independent Audit Regulators (IFIAR). The workshop, which took place in Amsterdam, was hosted by the Netherlands Authority for Financial Markets (AFM). Consistent with one of the key objectives of IFIAR, the workshop provided members with an opportunity to share knowledge about inspection techniques and experiences. The workshop considered, inter alia, issues around whole firm and audit engagement file reviews, staffing and technology and the reporting of, and follow up on, inspection findings. Audit inspection plays an important role in the improvement of audit quality and will, for that reason, remain a key area of focus for IFIAR. IAASA is a founding member of IFIAR. Career opportunities within IAASAFriday, 25th May, 2007: The Authority wishes to recruit a number of key professional staff. Details of the posts on offer can be viewed here. This competition is now closed. CESR publishes selected information from its database of enforcement decisions taken by EU/EEA national supervisors of financial informationMonday, 16th April, 2007: The Committee of European Securities Regulators (CESR) has today published extracts from its database of enforcement decisions taken by EU/EEA national supervisors of financial information that participate in the European Enforcer Co-Ordination Sessions (EECS). EU/EEA national supervisors monitor and review the financial statements of issuers and consider whether they comply with IFRS and other applicable reporting requirements, including relevant national law. As proposed in CESR Standard No 2 on Financial Information, ‘Co-Ordination of Enforcement Activities’, CESR has developed a confidential database of enforcement decisions taken by individual EU/EEA national supervisors as a source of information to foster appropriate application of IFRS. In response to public comment to the Standard, CESR has committed to publish extracts of the database to provide issuers and other users of financial information with similar assistance. The EECS is a forum in which all EU/EEA national supervisors of financial information, whether CESR members or not, meet to share the reasons underpinning their accounting enforcement decisions, canvas members’ views on issues currently being dealt with and to identify issues which do not appear to be covered by financial reporting standards or which may be affected by conflicting interpretations for referral to standard setting or interpretive bodies such as the IASB or IFRIC. EECS is not a decision-making forum. It neither approves nor rejects decisions taken by EU National Supervisors. Publication of enforcement decisions will inform market participants about which accounting treatments EU national supervisors may consider as complying with IFRS, i.e. whether the treatments are considered as being within the accepted range of those permitted by the standards or related interpretations. Such publication, together with the rationale behind these decisions, will contribute to a consistent application of IFRS in the European Union. Decisions that deal with simple accounting matters, or oversight of IFRS requirements, will not normally be published, even where they are material breaches leading to sanctions. Published decisions will generally include a description of the accounting treatment or presentation at issue, the decision taken by the relevant EU national enforcer and a summary of the enforcer’s underlying rationale. In response to concerns about confidentiality and privacy laws, which vary between EU jurisdictions, extracts will not usually include the name of the issuer or the enforcer or any other details that would enable the issuer or its jurisdiction to be identified. For the reasons set out above, CESR anticipates publishing further extracts from the database on a regular basis. The current extracts can be assessed by clicking here. The Irish Auditing and Accounting Supervisory Authority is a member of, and actively participates in, the EECS. In addition to its membership of the EECS proper, the Authority is also a member of the EECS’ Agenda Group. Accordingly, in addition to contributing to the Group’s plenary meetings, the Authority has a direct input to, and involvement in: • the review of emerging cases and decisions as tabled by Member States’ enforcement authorities with a view to assessing those which should be afforded priority for consideration and discussion at the plenary; and • the review of enforcement decisions taken by EU/EEA accounting enforcers with a view to determining whether they should be published. Note: In some EU jurisdictions national supervisors may provide an opinion on a particular accounting issue before an issuer’s accounts have been finalized and published (this is not the regime operating in Ireland). These “pre-clearance decision” are made on the basis of information and assumptions supplied by the issuer to provide the context for the question and which may not be challenged by the enforcer. These pre-clearance decisions are identified as such in the published version. Authority recommends that entitlement to use of the description ‘accountant’ be restricted to certain personsMonday, 2nd April, 2007: The Irish Auditing & Accounting Supervisory Authority has recommended to the Minister for Trade & Commerce that use of the description ‘accountant’ should be restricted to certain persons. The Authority’s recommendation is based on, inter alia, the following considerations: • Members of the prescribed accountancy bodies are subject to a range of significant regulatory and monitoring measures, including: o the requirement to successfully complete professional examinations and obtain minimum experience requirements prior to being admitted to membership; o the requirement to obtain minimum post admittance experience (and in some cases, successfully complete a further interview/examination) prior to being authorised to offer services to the public; o the requirement for members engaging in public practice to have in place minimum levels of professional indemnity insurance and practice continuity arrangements; o the requirement that all members adhere to the prescribed accountancy bodies’ respective codes of conduct and standards, including those relating to professional ethics (which require to be approved by the Authority, as do amendments thereto); o the requirement for members to continually maintain their competencies by undergoing continuous professional development (CPD) on an annual/cyclical basis; o being subject to the prescribed accountancy bodies’ complaints, investigations and disciplinary processes and, by virtue of membership, affording aggrieved parties the right to seek recourse to those processes and procedures; • Members of the public reasonably assume that any person describing themselves as an ‘accountant’: o has completed the requisite examinations; o has satisfied the necessary experience requirements; and o is subject to the foregoing regulatory and monitoring measures; • Persons currently holding themselves out as accountants, but who are not members of the prescribed accountancy bodies (or certain other professional bodies), are not, however, subject to the aforementioned requirements; • By virtue of not being members of the prescribed accountancy bodies, such persons are not subject to oversight by the Authority, a situation that might reasonably be expected to be difficult for members of the public to understand in circumstances where the legislature has established a statutory body to supervise the accountancy profession; • The Authority acknowledges that members of the public are entitled, should they so choose, to engage the services of unqualified persons. However, the current entitlement of such persons to hold themselves out as ‘accountants’ gives rise to consequential risks that members of the public may inadvertently engage such persons on the understanding that they have in fact satisfied the foregoing requirements and are subject to the aforementioned regulatory, monitoring and oversight arrangements, thereby unknowingly exposing themselves to: o the risk of financial or other loss occasioned by acting on advice received from an unqualified person; and o a lesser degree of recourse in the context of making a complaint than would have been available had the person engaged been a member of a prescribed accountancy body; • In the Authority’s assessment, the existence of such risks runs counter to, and militates against, the public policy principles underpinning the enactment of the Companies (Auditing and Accounting) Act, 2003 and the Authority’s core object of enhancing public confidence in the accountancy profession and its outputs; • The Authority has to date received a number of complaints from members of the public regarding persons who, while complainants believed them to be members of the prescribed accountancy bodies, have transpired not to be such, thereby resulting in a situation whereby such persons are neither subject to a prescribed accountancy body’s investigation and disciplinary process nor to the Authority’s oversight, a situation that, in the Authority’s assessment, unnecessarily serves to diminish public confidence in the regulatory and oversight system; and • By virtue of not being subject to any form of regulation and, as a consequence, the costs associated with regulation, unqualified persons can operate at a cost advantage to those who are subject to regulation and oversight, a concept that is considered to be counter-intuitive. Having consulted with interested parties on two occasions and having conducted a detailed examination of the issue and related issues, the Authority has tabled the following recommendations to the Minister: 1. That a legal restriction on the use of the term ‘accountant’ be introduced. 2. That the foregoing restriction should not be accompanied by the introduction of a restriction on the provision of accountancy services. 3. That the aforementioned restriction should apply to persons providing services to members of the public only i.e. should not extend to persons in employment. 4. That the introduction of a restriction on the use of the term be accompanied by a further provision to the effect that only firms controlled by persons entitled to described themselves as ‘accountants’ should be entitled to describe themselves as firms of accountants. 5. That members of the nine prescribed accountancy bodies should automatically be entitled to use the description by virtue of their membership of those bodies. 6. That persons, other than members of the prescribed accountancy bodies, currently eligible to act as auditors under the Companies Acts should automatically be entitled to use the description by virtue of their eligibility. 7. That any enabling legislation should further make provision whereby persons other than the foregoing categories of person would have a right to apply to a (to be determined) competent authority for the entitlement to use the description and that their eligibility to do so be based on predetermined considerations including, inter alia, their qualifications, experience and the provisions of EU Directives on mutual recognition of qualifications. 8. That all persons entitled to use the description under the preceding recommendations should be subject to a similar level of regulation and oversight, irrespective of whether they are members of a prescribed accountancy body or not. 9. That, with a view to giving effect to the preceding recommendation, consideration should be given to requiring all such persons entitled to use the term - who are not members of the prescribed accountancy bodies – to submit themselves to regulation by a prescribed accountancy body, thereby also subjecting themselves to oversight by the Authority, subject to the provision of appropriate safeguards to ensure that persons deemed eligible by the (to be determined) competent authority to use the description cannot be unfairly or unreasonably denied regulation by those bodies. In the Authority’s assessment, the foregoing approach would have the following benefits/advantages: • the necessity for the Authority to regulate such persons directly – which would be both costly and disproportionately labour intensive – would be avoided; • regulated persons would, by paying registration fees to the prescribed accountancy bodies (who in turn provide 60% of the Authority’s funding), fund their own regulation as well as contributing to the oversight costs associated with their entitlement to use the description; • such an approach would mirror the approach taken by section 35(c) of the Companies (Auditing and Accounting) Act, 2003 whereby individually authorised auditors must submit themselves to regulation by the recognised accountancy bodies within 3 years of the commencement of the subsection or, failing to do so, their audit authorisations will be rendered void. 10. That, in light of its recent completion of a review of Companies Acts’ civil and criminal offence provisions in the context of the forthcoming Companies (Consolidation) Bill, the Company Law Review Group be charged with determining whether breaches of the aforementioned restriction should constitute civil, criminal (or both) offences under the Companies Acts. 11. That consideration should be given to the provision of transitional provisions in the event of legislation being enacted to give effect to the foregoing recommendations. International audit regulators hold first meeting of IFIARMonday, 26th March, 2007: On 22 and 23 March 2007, independent audit regulators from 22 countries attended the first meeting of the International Forum of Independent Audit Regulators ("IFIAR"), since it was formed in September 2006. The host for the meeting was the Certified Public Accountants and Auditing Oversight Board (“CPAAOB”) of Japan. Regulatory authorities from Finland, Korea, Sri Lanka, Switzerland and the United States were admitted as members. Existing members from Australia, Austria, Brazil, Canada, Denmark, France, Germany, Ireland, Italy, Japan, the Netherlands, Norway, Singapore, South Africa, Spain, Sweden, and the United Kingdom all attended the meeting. The Financial Stability Forum, the World Bank, the International Organisation of Securities Commissions, the Basel Committee, the Public Interest Oversight Board and the European Commission were also present as observers. Key areas for discussion at the meeting included: ➢ Drivers of audit quality. ➢ Exchange of information between regulators. ➢ Discussion of the availability of high quality audits, where the market for audit services is concentrated. ➢ Relations with countries in the process of establishing independent oversight authorities. ➢ Continue dialogue with other international organizations, which have an interest in audit quality. ➢ Registration of auditors of foreign issuers. It was decided to hold a workshop for members on audit inspection techniques. Drivers of Audit Quality The meeting discussed the drivers of audit quality based on the feedback of IFIAR members on the publication ‘Promoting audit quality', issued by of the UK Financial Reporting Council. The meeting decided that the issue of audit quality should remain an important area for discussion at future meetings. Exchange of information between audit regulators IFIAR also discussed issues on exchange of information among audit regulators based on a survey of members to assess factors affecting the exchange of information. The survey focused on member regulators’ abilities and experiences to access to information outside of their jurisdictions. Members decided that the issue of the ability of members to exchange information should be monitored. Discussion of the availability of high quality audits A workshop was held to consider alternative strategies to ensure the sustainability of high quality audits, given the concentration of the audit market. In this context, IFIAR members felt that they would like to dialogue with other authorities. Audit inspection workshop Audit inspections will remain a key area of focus for IFIAR. IFIAR has arranged for two-day workshop to be held in Amsterdam on 30 and 31 May 2007. This workshop will provide an opportunity for the exchange of inspection techniques and experiences, which is consistent with one of the key objectives of IFIAR to enhance the exchange of information between audit regulators. The position of countries in the process of establishing independent oversight authorities IFIAR members recognised the desirability of promoting audit quality globally and to that end it agreed it will assist countries that are in the process of creating independent auditor oversight bodies. Accordingly, the meeting adopted arrangements for allowing persons, which were independent of the auditor profession and aspiring to meet IFIAR's other membership criteria to participate in relevant IFIAR discussions, with the agreement of IFIAR members. Dialogue with other international organizations, which have an interest in audit quality IFIAR agreed to continue discussions with other international organizations with an interest in audit quality, including the Public Interest Oversight Board, Monitoring Group and the Financial Stability Forum. Registration of auditors of foreign issuers. Members discussed a range of issues raised by legislative requirements in a number of countries for the registration of auditors of foreign issuers. They agreed to monitor such legislative changes. EU Commissioner McCreevy meets with PCAOB Chairman Mark Olson on EU-US cooperation on audit regulationWednesday, 7th March, 2007: At a meeting in Washington DC on 6 March, EU Internal Market and Services Commissioner Charlie McCreevy and Public Company Accounting Oversight Board (PCAOB) Chairman Mark Olson agreed to launch roadmap discussions on co-operation between EU and US auditor public oversight systems. They have mandated their staff to commence work and will review progress at their next meeting. The goal is to move towards full reliance on each others' oversight systems by 2009. Both sides will take stock and review progress in October 2007. Welcoming the positive outcome of the meeting, Commissioner McCreevy said “This is a sign of our common interest in reducing administrative burdens whilst strengthening investor protection. It will allow us to maintain the openness of capital markets to issuers from abroad. I join Mark Olson in welcoming this deepening of EU-US co-operation on audit regulation, and look forward to building on the experience we have gained in the area of accounting.” Commissioner McCreevy emphasized: “Equivalence does not require systems and standards to be identical but simply to be robust enough to ensure investor confidence. The goal is to move towards inspections of audit firms carried out by an independent and rigorous home-country public oversight authority by 2009. Sending inspectors abroad is a costly and complex exercise. We need to establish a system based on mutual trust which avoids duplication”. The 2006 Directive on statutory audit obliges EU Member States to register and oversee third-country auditors, including US auditors, of companies listed on EU regulated markets. If a US auditor fails to register in the Member State concerned, its audit opinion will be invalidated. US auditors may thus face multiple registrations and public oversight in several EU Member States. Part of the steps necessary for registration will be compliance by US auditors with auditing standards and independence rules relevant in the EU unless US standards are considered to be equivalent. To reduce the administrative burden for audit firms and companies from third countries, including the US, the Directive empowers the Commission to recognise third-country oversight of auditors as equivalent throughout the EU. The Commission may also accept the equivalence of US independence requirements and auditing standards. Consequently, the audit firms would not have to adapt to domestic rules in the EU Member States. Under the Directive, the Commission shall also establish a framework allowing EU public oversight bodies to conclude bilateral agreements with third-country oversight bodies, such as the US PCAOB. The Commission launched a public consultation on all of these issues on 11 January 2007. In the context of the foregoing, the Commission set up an advisory expert group – the European Group of Auditor Oversight Bodies (EGAOB) in December 2005, of which the Authority is a member. IASB publishes draft IFRS for SMEsTuesday, 27th February, 2007: The International Accounting Standards Board (‘IASB’) announced the publication of its Exposure Draft (‘ED’) dealing with International Financial Reporting Standards for Small and Medium-sized Entities (‘IFRS for SMEs’) on 15th February. The text of the ED has today been made available on the IASB website (http://www.iasb.org/Home.htm) The ED is of major importance in the context of the Accounting Standards Board’s (ASB) convergence project and is, therefore, of particular relevance in an Irish context. To date, the ASB has consulted on its convergence strategy on three separate occasions, i.e. in 2004, 2005 and 2006 respectively. In summary, the tentative proposals put forward by the ASB in 2006 were that: 1. All publicly quoted and other publicly accountable companies would be required to apply full IFRS, irrespective of turnover and whether they present group accounts or not; 2. The use of the ASB’s Financial Reporting Standard for Smaller Entities (FRSSE), which enables small entities to take advantage of certain simplified requirements, would be extended beyond small companies to include medium-sized entities; 3. Subsidiaries of parent entities that apply full IFRS would also be required to apply full IFRS in respect of measurement and recognition, but with reduced disclosure requirements (not yet defined); and 4. No definitive proposals were put forward regarding companies that do not fall within categories 1, 2 or 3 above. Alternatives that were identified, however, included: • extending the application of the FRSSE further; • applying IFRS to more companies; • maintaining UK GAAP for affected entities; or • some combination of these three alternatives. Responses to the ASB’s proposals broadly supported a two-tier approach, with the lower end of the spectrum potentially being based on the IASB’s SME project. In that context, the ASB stated that once the IASB’s proposals were published it would consider further as to whether the proposals contained therein are, in its judgement, suitable for the needs of its UK and Irish constituents. As is clear from the foregoing, the ED is particularly important to Irish stakeholders and will require detailed consideration for the following reasons: 1. whether the ASB deems the ED as being suitable for the UK and Ireland will, potentially, be a key determinant of whether, and if so to what extent, ASB Standards will converge with IFRS in the future. 2. It is a matter for each EU Member State to decide upon which accounting standards SMEs should follow. In that context, the ASB’s deliberations on the suitability of the ED for use by SMEs is likely to be influential in Ireland’s decision making process in this regard. 3. This IASB ED could be the accounting standard used by SME companies in the future and constituents should determine whether they deem them suitable for their needs and respond to the ED as they see fit. It should be noted that the ED defines SMEs as entities that: • do not have public accountability; and • publish general purpose financial statements for external users. However, the IASB believes that the proposed framework of IFRS for SMEs would be suitable even for very small entities. The FRSSE can currently only be used by companies that qualify as small under the Companies Acts and other entities of similar size. Therefore, the ED accommodates much larger entities than the FRSSE and this needs to be borne in mind when analysing and comparing the two documents. It is anticipated that the ASB will issue the ED for consultation with an accompanying ASB Invitation to Comment, giving an insight into the Board’s initial views on the Exposure Draft and its potential implications for UK and Irish entities. In conclusion, the ED will form a key component to future discussions on convergence of ASB accounting standards to IFRS. As the Irish Auditing and Accounting Supervisory Authority (IAASA) has a statutory role to act as a specialist source of advice to the Minister on accounting matters, to co-operate with interested parties in developing accounting standards, and is an observer at the ASB, we will be monitoring and contributing to the ASB debate on this important topic. In that context, we would welcome any views you have on the ED. Comments can be e-mailed to info@iaasa.ie or written comments submitted to –
ASB issues Exposure Draft on half-yearly financial reportsWednesday, 14th February, 2007: The Accounting Standards Board (‘ASB’) has today published an Exposure Draft (‘ED’) entitled ‘Half-Yearly Financial Reports’, and is inviting public comment thereon. The document sets out proposed revisions to the ASB’s current Statement on interim reports. The ED has been issued in the context of EU Member States’ requirement to transpose the Transparency Directive (‘the Directive’) into national law by 20th January 2007. The ED seeks to provide guidance to those UK and Irish issuers that:
Given the possibility that Irish issuers not required to, or not choosing to, use IAS 34 in preparing their half-yearly financial reports may be required by Regulation to apply the final ASB Statement in preparing such reports, the ED may assume considerable importance from the perspective of affected issuers. In that context, the Authority considers the development of the document by the ASB to be a welcome and positive development and, through its role as observer at the ASB, has been monitoring and providing input to the development of the document, particularly having regard to certain important considerations from an Irish perspective. Among the considerations of note in an Irish context are:
While interested parties’ responses to the ED should be made directly to the ASB in the normal manner, given that the Authority will have responsibility for monitoring affected issuers’ compliance with the financial reporting framework requirements set out in the Directive as transposed into Irish law, the Authority would welcome any comments that interested parties might have on the document. Comments can be e-mailed to info@iaasa.ie or written comments submitted to –
The full text of the Exposure Draft can be found here. EU Commission consults on possible reform of auditor liability rules in the EUThursday, 18th January, 2007: The European Commission has today launched a public consultation on whether there is a need to reform rules on auditors’ liability in the EU and on possible ways forward. This follows the commissioning of an independent study on the economic impact of current auditors' liability regimes and on insurance conditions in Member States which identified, inter alia, four key issues, viz:
Arising from the foregoing, the Commission has presented four possible options for reforming auditors' liability regimes in the EU, viz:
and is now inviting stakeholders to give their views (to markt-F4@ec.europa.eu) on the issues involved by 15 March 2007. The Commission’s Consultation Paper, together with the Annexes thereto, can be accessed here: Authority invites comments on draft S. 23 RegulationsFriday, 12th January, 2007: The Authority has issued draft Regulations governing the conduct of enquiries pursuant to section 23 of the Companies (Auditing and Accounting) Act, 2003 and an accompanying Consultation Paper. The Authority is now inviting comments on the draft Regulations. The closing date for receipt of submissions is 31 March, 2007. The draft Regulations and accompanying Consultation paper can be accessed here EU Commission invites comments on the regulation of non EU audit firms under the 8th Company Law DirectiveThursday, 11th January, 2007: The European Commission has today launched a public consultation on its future strategy and priorities on statutory audit in relation to non-EU countries ('third countries'). The Commission is inviting interested parties’ views on how third-country audit firms might be supervised under the Directive; and how the EU might co-operate with third countries. The Commission hopes that the consultation exercise will assist in finding pragmatic and consistent solutions within the framework of the Directive on Statutory Audit (revised 8th Company Law Directive). Interested parties are invited to submit their contributions to the EU Commission (at MARKT-F4-3RDCOUNTRIES@ec.europa.eu) by the 5 March 2007. The revised 8th Company Law Directive requires third-country audit firms to register in each EU Member State where their clients' securities are admitted to trading (Article 45 refers). Preliminary estimates indicate that approximately 220 audit firms auditing issuers from about 63 third countries will be affected by these rules. Whilst the implementation of the Directive is primarily a matter for EU Member States, the Commission wishes to obtain views on action it might take to facilitate the implementation of the Directive and to avoid market fragmentation. The Directive on Statutory Audit allows for exemptions from registration and empowers the European Commission to decide on equivalence of third-country audit systems (Article 46 refers). If a third-country audit regulatory system is found to be equivalent, EU Member States then have a common ground for assessing third-country audit firms for registration purposes. The Commission’s consultation seeks interested parties’ views on priorities in equivalence assessment of third countries' audit regulation. Interested parties are also invited to comment on possibilities for coordination of registration procedures for third-country audit firms among EU Member States, as well as on a possible role for the European Group of Auditors Oversight Bodies (EGAOB), of which the Irish Auditing & Accounting Supervisory Authority is a member, in such cooperation. The Directive also empowers the Commission to grant a transitional period for audit firms from third countries that cannot yet benefit from equivalence. Such a measure could be taken to avoid disruptions to European capital markets. In this context, the Commission’s consultation paper seeks views on the transitional use of auditing standards such as US GAAS (United States Generally Accepted Auditing Standards) and ISAs (International Standards on Auditing). The Directive allows for cooperation with third-country competent authorities on transfer of audit working papers held by EU audit firms to third countries and sets conditions for such cooperation (Article 47). The consultation paper also seeks interested parties' views on the scope for such cooperation and on circumstances under which an audit firm could make an exceptional direct transfer of audit working papers to a third country. The Commission’s consultation paper can be accessed here. Minister refers current auditor liability regime to CLRGWednesday, 3rd January, 2007: Minister Michael Ahern TD, Minister for Trade & Commerce, has confirmed that he has asked the Company Law Review Group (CLRG) to examine the question of auditor liability in the context of the existing legal framework in Ireland, and with reference to a recent report commissioned by the EU on the impact of auditor liability regimes. The text of his press release can be found here. |
Irish Auditing & Accounting |
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