Chartered Accountants Ireland today acknowledged the publication by the European Commission, and welcomes, proposals aimed at reforming the role and scope of the statutory audit and regulation of the audit profession. These proposals, which follow on from a Green Paper published by the Commission, are aimed at clarifying the role of audit, strengthening auditor independence, and facilitating greater European integration and supervision of the audit market.
Commenting on the EU Commission announcement, Mr John Hannaway, President of Chartered Accountants Ireland, said;
‘The financial crisis has prompted stakeholders to raise questions about financial reporting and corporate governance and also about the role and scope of the statutory audit. Any proposals aimed at addressing the role of audit and auditors have to be judged against whether they will result in an improvement in audit quality, meet stakeholder expectations and contribute to a restoration of confidence in the capital markets. The EU proposals published today are complex and wide ranging and as such will need careful analysis. However, Chartered Accountants Ireland is supportive of measures that clarify and enhance the role of audit, strengthens the role of audit committees and contribute to a single market for audit, a consequence of which is greater EU coordination of oversight of the audit profession.
Locally, Chartered Accountants Ireland has been active in pushing forward the debate on the future role and scope of statutory audit. This included hosting a number of stakeholder fora on the issue and one to one meetings with relevant parties and agencies. In January of this year, it published a Discussion Paper setting out a range of possible measures on how audit might evolve into the future and including how stakeholder expectations might be better served. We are pleased to note that some of these have been reflected in the current EU proposals.
The Commission proposal also envisages more radical measures such as ‘audit only’ firms in certain circumstances and mandatory audit firm rotation. Such measures will require careful consideration and analysis by government particularly at a time when cost competitiveness of Ireland Inc. is imperative. The views of the users of audit services are particularly important and the wider global dimension must also be considered
Two specific measures that have been progressed locally are the development of a ‘protocol’ between the Central Bank and the audit profession on how communication between both parties should take place in the future.This initiative is expected to be in place for audits of 2011 year ends. In addition, the profession is currently involved in a process with the Central Bank that will result in guidance on how auditors should provide assurance on the internal governance processes and procedures of regulated entities. We look forward to a successful outcome of this.
For its part, the previous Government announced that it would move to adopt an existing EU Recommendation that larger audit firms would become subject to an independent, external monitoring, or quality assurance, regime in respect of their listed company audits. The Institute looks forward to early implementation of this measure which will be an important element in restoring confidence in audit and improving transparency.
Chartered Accountants Ireland acknowledges that it is appropriate that the role and scope of audit is reassessed. We shall now move to examine in detail the proposals from the EU Commission and engage constructively with relevant stakeholders.’
Ends
Notes for Editors
- The EU Commission published its proposals on 30th November 2011. The Commission proposals can be found at http://europa.eu/rapid/pressReleasesAction.do?reference=IP/11/1480&format=HTML&aged=0&language=EN&guiLanguage=en
- For further information, please contact Aidan Lambe, Director, Technical Policy at Chartered Accountants Ireland at 087 2445102 or email aidan.lambe@charteredaccountants.ie