Opinion of Advocate General Campos Sánchez-Bordona delivered on 10 December 2020.

• Jurisdiction: European Union
• ECLI: ECLI:EU:C:2020:1019
• Date: 10 December 2020
• Celex Number: 62019CC0950
• Court: Court of Justice (European Union)

Provisional text

OPINION OF ADVOCATE GENERAL

CAMPOS SÁNCHEZ-BORDONA

delivered on 10 December 2020 (1)

Case C‑950/19

A

intervener:

Patentti- ja rekisterihallituksen tilintarkastuslautakunta

(Request for a preliminary ruling from the Helsingin hallinto-oikeus (Administrative Court, Helsinki, Finland))

(Reference for a preliminary ruling – Auditors – Directive 2006/43/EC – Article 22a – Cooling-off period for the engagement of former auditors by the audited company – Infringement of the prohibition on taking up a key management position in the audited entity – Independence of auditors)

1. Directive 2006/43/EC (2) provides that auditors must be independent of the audited entity and must not be involved in the decision-taking of that entity.

2. One of the statutory requirements laid down in order to ensure such independence was adopted in 2014, in Directive 2014/56/EU, (3) which incorporated into Directive 2006/43 a new provision, Article 22a, under which persons having the status of ‘key audit partner’ (4) are not allowed to take up a key management position in the audited entity for a given period. (5)

3. Since 2014, that prohibition, which had previously applied, as one would expect, to the period of the key audit partner’s role as the person primarily responsible for the statutory audit of the audited undertaking’s accounts, has also applied to the period (of one or two years, depending on whether or not the undertaking in question is a public-interest entity) (6) subsequent to that person’s departure from the role of key audit partner.

4. In this case, a ‘key audit partner’ in an audit firm was recruited, prior to leaving his role as such, to a senior management position in the audited company.

5. That conduct having been penalised by the competent body (the Audit Committee), (7) the auditor challenged the fine which had been imposed on him before the referring court. That court has made a reference to the Court of Justice for a preliminary ruling on the interpretation of Article 22a(1)(a) of Directive 2006/43.

6. The Court’s answer will determine whether the position in the audited undertaking is taken up when the key audit partner signs an employment contract with that undertaking or not until that person actually starts to perform his managerial duties.

I. Legal framework

A. EU law. Directive 2006/43

7. Article 2 (‘Definitions’) provides:

‘For the purposes of this Directive, the following definitions shall apply:

2) “statutory auditor” means a natural person who is approved in accordance with this Directive by the competent authorities of a Member State to carry out statutory audits;

3) “audit firm” means a legal person or any other entity, regardless of its legal form, that is approved in accordance with this Directive by the competent authorities of a Member State to carry out statutory audits

…

16) “key audit partner”:

a) the statutory auditor(s) designated by an audit firm for a particular audit engagement as being primarily responsible for carrying out the statutory audit on behalf of the audit firm; or

b) in the case of a group audit, at least the statutory auditor(s) designated by an audit firm as being primarily responsible for carrying out the statutory audit at the level of the group and the statutory auditor(s) designated as being primarily responsible at the level of material subsidiaries; or

c) the statutory auditor(s) who sign(s) the audit report’.

8. Article 22 (‘Independence and objectivity’) provides:

‘1. Member States shall ensure that, when carrying out a statutory audit, a statutory auditor or an audit firm, and any legal person in a position to directly or indirectly influence the outcome of the statutory audit, is independent of the audited entity and is not involved in the decision-taking of the audited entity.

Independence shall be required at least during both the period covered by the financial statements to be audited and the period during which the statutory audit is carried out.

Member States shall ensure that a statutory auditor or an audit firm takes all reasonable steps to ensure that, when carrying out a statutory audit, his, her or its independence is not affected by any existing or potential conflict of interest or business or other direct or indirect relationship involving the statutory auditor or the audit firm carrying out the statutory audit and, where appropriate, its network managers, auditors, employees, any other natural persons whose services are placed at the disposal or under the control of the statutory auditor or the audit firm, or any person directly or indirectly linked to the statutory auditor or the audit firm by control.

The statutory auditor or the audit firm shall not carry out a statutory audit if there is any threat of self-review, self-interest, advocacy, familiarity or intimidation created by financial, personal, business, employment or other relationships between:

– the statutory auditor, the audit firm, its network, and any natural person in a position to influence the outcome of the statutory audit, and

– the audited entity,

as a result of which an objective, reasonable and informed third party, taking into account the safeguards applied, would conclude that the statutory auditor’s or the audit firm’s independence is compromised.

2. Member States shall ensure that a statutory auditor, an audit firm, their key audit partners, their employees, and any other natural person whose services are placed at the disposal or under the control of such statutory auditor or audit firm and who is directly involved in statutory audit activities, and persons closely associated with them within the meaning of Article 1(2) of Commission Directive 2004/72/EC […], do not hold or have a material and direct beneficial interest in, or engage in any transaction in any financial instrument issued, guaranteed, or otherwise supported by, any audited entity within their area of statutory audit activities, other than interests owned indirectly through diversified collective investment schemes, including managed funds such as pension funds or life insurance.

3. Member States shall ensure that a statutory auditor or audit firm documents in the audit working papers all significant threats to his, her or its independence as well as the safeguards applied to mitigate those threats.

4. Member States shall ensure that persons or firms referred to in paragraph 2 do not participate in or otherwise influence the outcome of a statutory audit of any particular audited entity if they:

a) own financial instruments of the audited entity, other than interests owned indirectly through diversified collective investment schemes;

b) own financial instruments of any entity related to an audited entity, the ownership of which may cause, or be generally perceived as causing, a conflict of interest, other than interests owned indirectly through diversified collective investment schemes;

c) have had an employment, or a business or other relationship with that audited entity within the period referred [to] in paragraph 1 that may cause, or may be generally perceived as causing, a conflict of interest.

5. Persons or firms referred to in paragraph 2 shall not solicit or accept pecuniary or non-pecuniary gifts or favours from the audited entity or any entity related to an audited entity unless an objective, reasonable and informed third party would consider the value thereof as trivial or inconsequential.

6. If, during the period covered by the financial statements, an audited entity is acquired by, merges with, or acquires another entity, the statutory auditor or the audit firm shall identify and evaluate any current or recent interests or relationships, including any non-audit services provided to that entity, which, taking into account available safeguards, could compromise the auditor’s independence and ability to continue with the statutory audit after the effective date of the merger or acquisition.

As soon as possible, and in any event within three months, the statutory auditor or the audit firm shall take all such steps as may be necessary to terminate any current interests or relationships that would compromise its independence and shall, where possible, adopt safeguards to minimise any threat to its independence arising from prior and current interests and relationships’.

9. Article 22a (‘Employment by audited entities of former statutory auditors or of employees of statutory auditors or audit firms) reads:

‘1. Member States shall ensure that a statutory auditor or a key audit partner who carries out a statutory audit on behalf of an audit firm does not, before a period of at least one year, or in the case of statutory audit of public-interest entities a period of at least two years, has elapsed since he or she ceased to act as a statutory auditor or key audit partner in connection with the audit engagement:

a) take up a key management position in the audited entity;

b) where applicable, become a member of the audit committee of the audited entity or, where such committee does not exist, of the body performing equivalent functions to an audit committee;

c) become a non-executive member of the administrative body or a member of the supervisory body of the audited entity.

2. Member States shall ensure that employees and partners other than key audit partners of a statutory auditor or of an audit firm carrying out a statutory audit, as well as any other natural person whose services are placed at the disposal or under the control of such statutory auditor or audit firm, do not, when such employees, partners or other natural persons are personally approved as statutory auditors, take up any of the duties referred to in points (a), (b) and (c) of paragraph 1 before a period of at least one year has elapsed since he or she was directly involved in the statutory audit’.

10. Article 22b (‘Preparation for the statutory audit and assessment of threats to independence’)...