EGIAN Perspective on EU Audit Exemption Thresholds & emerging forms of assurance 23 rd May 2013

Transcription

1 CFRR: REPARIS Workshop EGIAN Perspective on EU Audit Exemption Thresholds & emerging forms of assurance 23 rd May 2013

2 Opening Remarks Opening thoughts Our Opportunity Background Feel free to comment/question

3 What I will cover today 1. Who and what is EGIAN? 2. Our members experience of raising audit exemption thresholds 3. Recent trends and emerging forms of assurance

4 The Mission of EGIAN A platform for our members, the Mid-tier firms EGIAN scale & resources The VOICE of the Mid-tier in Europe Impact & influence in the Public Interest Alerting our members to EU activity for selected topics Mission Helping to facilitate a high quality influential Mid-tier of the International Accounting Profession. Assisting members, where EGIAN can make a difference, with global issues which have an impact on members businesses in Europe. To be an information source, a forum for collaboration between members and their voice on relevant issues. Understood and valued for what we do for Internationally ambitious firms, networks, associations and alliances. Helping them to better serve their growing client bases.

5 Who does EGIAN represent? 24 Members Mid-Tier Networks and Associations Europe Global EGIAN Combined income 10+ bn 30+ bn EGIAN Combined staff 115, ,000 Big 4 Combined income 37bn 86bn Big 4 Staff 300, ,000

6 EGIAN activities Representative and Voice of Mid-Tier in Eu Regulatory information and discussion forum Listed Company Audit Market Focus Group SME Market Focus Group Public Sector Accounting Standards Meetings with MEPs, Commission, other European organisations Contacts with FEE and national accountancy institutes Country initiatives

7 AGN International Alliott Group Baker Tilly International BKR International Crowe Horwath International DFK International Geneva Group International Grant Thornton International HLB International IAPA INPACT International Kreston International Membership of EGIAN INAA Mazars Moore Stephens International Morison International MSI Global Alliance Nexia International PKF International Prime Global Roedl & Partner RSM International Russell Bedford International UHY International

8 Emerging trends Focus on mid-tier firms & their international networks and associations: Global regulatory focus and rapid change European Reforms Regulation or Directive More Listed company AUDIT, assurance & advisory Audit Exemptions rising thresholds Voluntary Audit & Assurance Dynamic support for Entrepreneurs Public Sector Accounting Ongoing Globalisation of Business

9 SME Market Focus Group Background 1. SME important to growth/job creation in EU 2. All members have thousands of SME clients 3. Accountants well placed to assist SME growth 4. There are many EU initiatives & threats to SMEs 5. Post crisis Access to Finance prime advisory role 6. Demonstrate our work in public interest

10 SME Market Topics Commercial/Access to Finance/Growth i. Encouraging Entrepreneurship & Growth ii. iii. Access to Capital via Mid-Tier Accountants EC SME Policy & Simplification Technical including Assurance, Audit & Accounts i. Audit & Accounting Thresholds ii. iii. iv. The value of Voluntary Audit Non-statutory Assurance Proportionality/Materiality of ISAs/Ethics rules v. Refresh of Company Law Directives vi. IFRS for SMEs future development

11 Raising Audit Exemption Thresholds Survey What is the audit exemption threshold in your country and when was it introduced? What effect did introduction of audit exemption (if any) have on your audit and accountancy profession? If you do not have audit exemptions, what effect do you think there would be on your firm and the rest of your accounting profession if one is introduced as a result of the rewrite of the EU 4th & 7th Directives on Accounting and Company Law? If your exemption level is raised as a result of the rewrite of the EU 4th & 7th Directives on Accounting and Company Law, what effect do you anticipate for your firm and profession? What, if any, alternative forms of assurance has your country introduced for some or all of the audit exempt companies?

12 Raising Audit Exemption Thresholds Survey How successful are any such alternative forms of assurance in your country? Are you aware of any other forms of alternative assurance which could be introduced in your country? Are there any types of companies/entities that do not require any form of audit or assurance in your country? To what extent do you think that audit exemption helps to reduce the regulatory burden on certain small companies? Is what way is exemption from audit and assurance requirements for smaller companies a problem, if at all?

13 Raising Audit Thresholds Trend to increase audit exemption thresholds in EU 97% of all EU audits are SME audits The market for statutory audit is shrinking (95% are below EU audit threshold) Substitution by voluntary audits is not evident However, the economy continues to need comfort that the financial performance of companies is fairly presented

14 Use of Audit Exemptions for Limited Liability Companies in the EU Countries % Maximum or near maximum thresholds: Balance sheet total: Net turnover: (Austria, Belgium, Germany, Ireland, Italy, Luxembourg, the Netherlands, Romania, Slovenia, United Kingdom) Balance sheet total: between and Net turnover: between and (Greece, Poland and Spain) Balance sheet total: between and Net turnover: between and (Czech Republic, France (except SA), Lithuania and Portugal) (1) 11

15 Use of Audit Exemptions for Limited Liability Companies in the EU Countries % Balance sheet total: between and Net turnover: between and (Estonia 1,4 and Slovak Republic 1 ) Balance sheet total: between and Net turnover: between and (Bulgaria, Denmark 1,4, Finland 2, Hungary 1 and Latvia 1 ) Balance sheet total/ net turnover: 0 (Cyprus 3, France (SA), Malta 3, Sweden 4 ) Total Introduction or increase in 2007, 2008 or Decrease in For tax purpose 4 Increase in 2010 (final or expected)

16 Noteworthy special thresholds? Belgium note consolidated group 14.6m/29.6m/250 Cyprus tax authorities need audited Denmark none to 2006 then introduced but from 2013 a new Danish audit standard for a review called an audit up to 10m turnover Germany also partnership where a person is unlimited liability up to 65m/130m/5,000 Malta No exemptions at all Poland all FS companies need to be audited Portugal also all Lda s & not for profit exempt Sweden very low 150k/300k/3

17 What effect on the profession? Less auditors and less know-how and competition Hence need to change to advisors or lose work Easier if the thresholds are gradually introduced Can also be affected by length of audit mandate Can result in unreliable public information Can result in tax authorities having less tax Can result in unexpected bankruptcies Banks & lenders often expect audited FS Sometimes where little or no exemptions auditors allowed to give advice Can result in splitting of business to stay under

18 Alternative forms of assurance? Voluntary Audit possibly 10% to 40% select Limited (Assurance) Review enquiries & analytical procedures, usually negative assurance opinion Compilation Service no assurance except compiled in accordance with local gaap based on information provided Agreed upon procedures used widely for grants Tax field audit plausabilty checks in Germany Tax and Social Security certificates in Greece

19 Other entities Public sector and state owned organisations Sole owner businesses & Unlimited Partnerships German companies where a human person takes full liability for all debt avoids audit and publication of accounts

20 Other points Lender/Creditor/3 rd party shareholder protection Help still required on accounting/payroll/tax Benefit of an independent qualified accountant being involved in some capacity Can an ISA audit be done properly on a small company? What independent evidence/segregation/internal control exists to verify? For audit exemption threshold choose the level where benefits outweigh the costs Balance skilled resource available with requirements

21 Closing Remarks Thank you John Capper Executive Director E: M: