The full European Parliament is expected to vote this month on European Union audit market reform, which has taken another step in the legislative process.
The EU Legal Affairs Committee voted 13–8, with one abstention, on Jan. 21 to approve a draft agreement between Parliament and the European Council. The draft agreement includes a requirement for public-interest entities to rotate audit firms every 10 years, with some exceptions.
Public-interest entities include listed companies, banks, and insurance firms. Engagements may be allowed to continue for a maximum of 20 years if the audit engagement is put out for bid, and for 24 years in cases where multiple audit firms share the engagement.
The draft agreement also would prohibit EU audit firms from providing certain nonaudit services to the public-interest entities they audit, including tax advisory services that directly affect the company’s financial statements. Another requirement would limit fees from permitted nonaudit services to an audit client to 70% of the audit fees.
The next step for the draft agreement is a vote by the full Parliament.
Changes proposed by the AICPA Auditing Standards Board (ASB) would restructure the content of several important attestation standards.
The ASB issued a second exposure draft as a result of the attestation clarity project. The ED, available at tinyurl.com/pf6pc7z, contains three proposed clarified subject-matter-specific standards.
Proposed Statement on Standards for Attestation Engagements (SSAE), Subject-Matter Specific Attestation Standards: Clarification and Recodification, builds on the general attestation standards proposed in the first exposure draft, Proposed SSAE, Attestation Standards: Clarification and Recodification.
The new proposal also restructures and would supersede the content in:
- AT Section 301, Financial Forecasts and Projections;
- AT Section 401, Reporting on Pro Forma Financial Information; and
- AT Section 601, Compliance Attestation.
The proposal also asks readers to consider whether the revised structure helps them understand and implement the standards.
Comments on the proposal are due May 27 and can be submitted to Sharon Macey at email@example.com.
With the release of a new auditing standard addressing the external auditor’s responsibilities if using the work of internal auditors, the ASB has completed the clarity redrafting of its final AU section in AICPA Professional Standards.
Developed using International Standard on Auditing 610 (Revised 2013), Using the Work of Internal Auditors, as a base, Statement on Auditing Standards (SAS) No. 128, Using the Work of Internal Auditors, supersedes AU Section 322 and AU-C Section 610, The Auditor’s Consideration of the Internal Audit Function in an Audit of Financial Statements.
SAS No. 128 significantly amends AU-C Section 315, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement. The new standard also amends other standards and is effective for audits of financial statements for periods ending on or after Dec. 15, 2014.
The new standard introduces the concept of a systematic and disciplined approach, which is consistent with ISA 610 (Revised 2013). SAS No. 128 requires that the external auditor evaluate the application by the internal audit function of a systematic and disciplined approach, including quality control, as a prerequisite for being able to use the work of the internal audit function.
The ASB has proposed amendments to AU-C Section 920, Letters for Underwriters and Certain Other Requesting Parties.
AU-C Section 920 was issued as part of the ASB’s clarity project and is a redrafting of AU Section 634 of the same title. When the clarified standard was issued, the ASB did not intend to change or expand AU Section 634 in any significant respect.
The proposed amendments to AU-C Section 920, available at tinyurl.com/l8k9e5v, are designed to address implementation issues and avoid unintended changes to previous practice. The proposed amendments are contained in Proposed Statement on Auditing Standards, Amendment to Statement on Auditing Standards No. 122, Statements on Auditing Standards: Clarification and Recodification, Section 920, Letters for Underwriters and Certain Other Requesting Parties, as amended.
The proposal also includes additional amendments that would further
clarify AU-C Section 920. Comments are due April 15 and can be
submitted to Sherry Hazel at firstname.lastname@example.org.