Directive 2014/56/EU of the European Parliament and of the Council of 16 April 2014 amending Directive 2006/43/EC on statutory audits of annual accounts and consolidated accounts Text with EEA relevance

• Published date: 27 May 2014
• Official Gazette Publication: Official Journal of the European Union, L 158, 27 May 2014

27.5.2014 EN Official Journal of the European Union L 158/196

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DIRECTIVE 2014/56/EU OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

of 16 April 2014

amending Directive 2006/43/EC on statutory audits of annual accounts and consolidated accounts

(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 50 thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the European Economic and Social Committee (1),

Acting in accordance with the ordinary legislative procedure (2),

Whereas:

(1) Directive 2006/43/EC of the European Parliament and of the Council (3) lays down the conditions for the approval and registration of persons that carry out statutory audits, the rules on independence, objectivity and professional ethics applying to those persons, and the framework for their public oversight. However, it is necessary to further harmonise those rules at Union level in order to allow for greater transparency and predictability of the requirements applying to such persons and to enhance their independence and objectivity in the performance of their tasks. It is also important to increase the minimum level of convergence with respect to the auditing standards on the basis of which the statutory audits are carried out. Moreover, in order to reinforce investor protection, it is important to strengthen public oversight of statutory auditors and audit firms by enhancing the independence of Union public oversight authorities and conferring on them adequate powers, including investigative powers and the power to impose sanctions, with a view to detecting, deterring and preventing infringements of the applicable rules in the context of the provision by statutory auditors and audit firms of auditing services.

(2) Because of the significant public relevance of public-interest entities, which arises from the scale and complexity of their business or from the nature of their business, the credibility of the audited financial statements of public-interest entities needs to be reinforced. Consequently, the special provisions for the statutory audits of public-interest entities set out in Directive 2006/43/EC have been further developed in Regulation (EU) No 537/2014 of the European Parliament and of the Council (4). The provisions on statutory audits of public- interest entities laid down in this Directive should be applicable to statutory auditors and audit firms only in so far as they carry out statutory audits of such entities.

(3) In accordance with the Treaty on the Functioning of the European Union (TFEU), the internal market comprises an area without internal frontiers in which the free movement of goods and services and the freedom of establishment are ensured. It is necessary to enable statutory auditors and audit firms to develop their statutory audit service activities within the Union by making it possible for them to provide such services in a Member State other than that in which they were approved. Enabling statutory auditors and audit firms to provide statutory audits under their home-country professional titles in a host Member State addresses, in particular, the needs of groups of undertakings which, owing to the increasing trade flows resulting from the internal market, draw up financial statements in several Member States and are required to have them audited under Union law. The elimination of barriers to the development of statutory audit services between Member States would contribute to the integration of the Union audit market.

(4) Statutory audit requires adequate knowledge of matters such as company law, fiscal law and social law which may vary from one Member State to another. Consequently, in order to ensure the quality of the statutory audit services provided on its territory, it should be possible for a Member State to impose a compensation measure where a statutory auditor approved in another Member State wishes to be approved also on the territory of that Member State in order to set up a permanent establishment there. Such measure should take account of the professional experience of the statutory auditor concerned. It should not lead to the imposition of a disproportionate burden on the statutory auditor nor hinder or render less attractive the provision of statutory audit services in the Member State imposing the compensation measure. Member States should be allowed to approve applicant statutory auditors on the basis either of an aptitude test or of an adaptation period such as that defined in Directive 2005/36/EC of the European Parliament and of the Council (5). At the end of the adaptation period, the statutory auditor should be able to integrate into the profession in the host Member State after the assessment that he possesses professional experience in that Member State.

(5) Whilst the primary responsibility for delivering financial information should rest with the management of the audited entities, statutory auditors and audit firms play a role by actively challenging the management from a user's perspective. In order to improve audit quality, it is therefore important that the professional scepticism exercised by statutory auditors and audit firms vis-à-vis the audited entity be reinforced. Statutory auditors and audit firms should recognise the possibility that a material misstatement due to fraud or error could exist, notwithstanding the auditor's past experience of the honesty and integrity of the audited entity's management.

(6) It is particularly relevant to reinforce independence as an essential element when carrying out statutory audits. In order to enhance the independence of statutory auditors and audit firms from the audited entity when they are carrying out statutory audits, a statutory auditor or an audit firm, and any natural person in a position to directly or indirectly influence the outcome of the statutory audit, should be independent of the audited entity and should not be involved in the audited entity's decision-making process. In order to maintain that independence, it is also important that they keep records of all threats to their independence and of the safeguards applied to mitigate those threats. Moreover, where the threats to their independence, even after the application of safeguards to mitigate those threats, are too significant, they should resign or abstain from the audit engagement.

(7) Statutory auditors and audit firms should be independent when carrying out statutory audits of audited entities, and conflicts of interest should be avoided. In order for the independence of statutory auditors and audit firms to be determined, the concept of a network in which statutory auditors and audit firms operate has to be taken into account. The independence requirement should at least be fulfilled during the period covered by the audit report, including both the period covered by the financial statements to be audited and the period during which the statutory audit is carried out.

(8) Statutory auditors, audit firms and their employees should in particular refrain from carrying out the statutory audit of an entity if they have a business interest or financial interest in it, and from trading in financial instruments issued, guaranteed or otherwise supported by an audited entity, other than holdings in diversified collective investment schemes. The statutory auditor or the audit firm should abstain from participating in the internal decision-making processes of the audited entity. Statutory auditors, audit firms and their employees directly involved in the statutory audit engagement should be prevented from taking up duties in the audited entity at managerial or board level until an appropriate period has elapsed since the end of the audit engagement.

(9) It is important that statutory auditors and audit firms respect the rights to private life and data protection of their clients. They should therefore be bound by strict rules on confidentiality and professional secrecy which should not, however, impede the proper enforcement of this Directive and of Regulation (EU) No 537/2014 or cooperation with the group auditor during the performance of the audit of consolidated financial statements when the parent undertaking is in a third country, provided that Directive 95/46/EC of the European Parliament and of the Council (6) is complied with. However, such rules should not allow a statutory auditor or an audit firm to cooperate with third-country authorities outside the cooperation channels provided for in Chapter XI of Directive 2006/43/EC. Those confidentiality rules should also apply to any statutory auditor or audit firm that has ceased to be involved in a specific audit task.

(10) Adequate internal organisation of statutory auditors and audit firms should help to prevent any threats to their independence. Thus, owners or shareholders of an audit firm, as well as those managing it, should not intervene in the carrying-out of a statutory audit in any way which jeopardises the independence and objectivity of the statutory auditor who carries out the statutory audit on behalf of the audit firm. Additionally, statutory auditors and audit firms should establish appropriate internal policies and procedures in relation to employees and other persons involved in the statutory audit activity within their organisations, in order to ensure compliance with their statutory obligations. Those policies and procedures should in particular seek to prevent and address any threats to independence and should ensure the quality,

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