Legislation

The EU Statutory Audit Directive (revised 8th Company Law) is the EU legislative initiative with the strongest impact on the audit profession that basically establishes rules concerning the statutory audit of annual account. The Directive revised the previous framework thus introducing key provisions in areas such as auditing standards, public oversight, auditor independence, third country auditors, definition of a network and ownership and control.

Among the 8th Directive articles, we point out the Art. 41 which specifically requires public-interest entities to establish an audit committee, responsible, amongst other duties, for monitoring the effectiveness of the entity’s risk management- and internal control systems, as well as the financial reporting process.

However, a directive is a legislative act of the European Union, which requires member states to achieve a particular result without dictating the means of achieving that result. It can be distinguished from regulations which are self-executing and do not require any implementing measures. Directives normally leave member states with a certain amount of leeway as to the exact rules to be adopted. Directives can be adopted by means of a variety of legislative procedures depending on their subject matter.

Therefore there is still more to leverage as the current European legislation/regulation does not contain yet any further authoritative ''HOW TO''- guidance for audit committee members, including good practices regarding the distinctive assurance roles of senior management and internal, respectively external audit.

Download the latest update on the 8th EU Directive