Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 2006/43/EC on statutory audits of annual accounts and consolidated accounts
Date: 2011-11-30
Institutions: European Commission
Subjects: audit, auditing, consolidated account, credit institution, insurance company, investment company, management audit, publication of accounts, small and medium-sized enterprises

EUROPEAN COMMISSION 

Brussels, 30.11.2011 
COM(2011) 778 final 

2011/0389 (COD) 

Proposal for a 

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

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

(Text with EEA relevance) 

{SEC(2011) 1384} 
{SEC(2011) 1385} 

 
 
  
 
EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

The measures adopted both in Europe and elsewhere in the direct aftermath of the financial 
crisis have mainly focused on the urgent need to stabilise the financial system. While the role 
played  by  banks,  hedge  funds,  rating  agencies,  supervisors  or  central  banks  has  been 
questioned and analysed in depth in many instances, little or no attention had been given to 
the role auditors played in the crisis – or indeed the role they should have played. Given that 
many banks revealed huge losses from 2007 to 2009 on the positions they had held both on 
and off balance sheet, it is difficult for many citizens and investors to understand how auditors 
could give clean audit reports to their clients (in particular banks) for those periods.  

It  is  important  to  note  that  in  a  crisis  where  €4  588.9  b illion  of  taxpayer  money  was 
committed  to  support  banks  between  October  2008  and  October  2009  and  where  such  aid 
accounted for 39% of EU 27 GDP in 20091, all components of the financial system need to be 
improved.  

Robust audit is key to re-establishing trust and market confidence. It contributes to investor 
protection by providing easily accessible, cost-effective and trustworthy information about the 
financial  statements  of  companies.  It  also  potentially  reduces  the  cost  of  capital  for  audited 
companies by ensuring more transparency and reliability of financial statements.  

It is also important to stress that auditors are entrusted by law to conduct statutory audits. This 
entrustment responds to the fulfilment of a societal role in offering an opinion on the truth and 
fairness  of  the  financial  statements  of  the  audited  entity;  the  latter  in  turn  are  able  to  enjoy 
limited liability and/or the possibility of providing services in the financial sector. 

the  procedures  for 

Since  1984,  EU  rules  have  partially  regulated  statutory  audit  when  a  directive  (Directive 
the  approval  of  auditors.  Directive 
1984/253/EEC)  harmonized 
2006/43/EC  of  the  European  Parliament  and  of  the  Council  of  17  May  2006  on  statutory 
audits  of  annual  accounts  and  consolidated  accounts,  amending  Council  Directives 
78/660/EEC  and  83/349/EEC  and  repealing  Council  Directive  84/253/EEC  (hereinafter 
Directive  2006/43/EC)  was  adopted  in  2006  and  considerably  broadened  the  scope  of  the 
former  Directive.  The  high  degree  of  concentration  in  audit  market  and  the  multitude  of 
approval  procedures  necessary  to  provide  cross-border  statutory  audits  prevent  small  and 
medium-sized audit firms from benefiting from the internal market. In line with Europe 2020 
Strategy2  that  calls  for  an  improvement  of  the  business  environment,  the  proposal  aims  at 
enhancing the internal market for statutory audits to allow small and medium-sized firms to 
grow and encourage the entry of new players. 

1 

2 

The large amounts of support approved under schemes can be explained by the fact that some Member 
States  adopted  blanket  guarantee  schemes  which  covered  all  their  banks'  debt.  Member  States  relied 
mainly  on  guarantee  measures.  €546.08  billion  (4 .5%  of  GDP)  was  approved  as  recapitalisation 
measures, of which Member States actually used about €141.5 billion in 2009. In the period between 
October  2008  and  October  2010  the  Commission  authorized  financial  crisis  measures  in  the  field  of 
State  aid  in  22  Member  States:  i.e.  all  Member  States  except  Bulgaria,  the  Czech  Republic,  Estonia, 
Malta and Romania. 
Communication  from  the  Commission  Europe  2020-  A  Strategy  for  smart,  sustainable  and  inclusive 
growth, COM(2010)2020 final, 3.3.2010. 

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The  current  Commission  proposal  on  the  amendments  to  the  Statutory  Audit  Directive  will 
coexist with a Proposal of a Regulation on the specific requirements on the statutory audit of 
public-interest  entities.3  The  two  proposals  are  part  of  the  ongoing  regulatory  reform  in 
various domains of the financial sector. As audit provides comfort on the veracity of financial 
statements, it remains one of the primary building blocks of financial stability. Other general 
initiatives  that  are  being  worked  upon  such  as  corporate  governance,  accounting  and  credit 
ratings are complementary to this proposal. Neither do they duplicate nor overlap with each 
other. 

The  proposal  contains  amendments  to  the  provisions  on  the  approval  and  registration  of 
auditors and audit firms, on the existing principles in the Statutory Audit Directive regarding 
professional ethics, professional secrecy, independence and reporting as well as the associated 
supervision  rules  that  remain  applicable  for  the  audit  of  non-public-interest  entities  (non-
PIEs). 

2. 

CONSULTATION OF THE INTERESTED PARTIES  

The Commission conducted a consultation from 13 October to 8 December 20104.  

In  all,  almost  700  responses  from  various  stakeholders;  these  included  members  of  the 
profession, 
investors,  academics,  companies,  government  authorities, 
professional bodies and individuals were received.  

supervisors, 

The consultation has shown both an appetite for as well as resistance to change; stakeholders 
who  are  currently  well  established  are  particularly  opposed  to  changes.  On  the  other  hand, 
especially small and medium sized practitioners as well as investors concluded that the recent 
financial crisis highlighted serious shortcomings. A summary of public submissions received 
can be found on: 

http://ec.europa.eu/internal_market/consultations/docs/2010/audit/summary_responses_en.pdf 

In addition, a high level conference on audit held by the Commission on 10 February 20115 
allowed for a further exchange of views.  

The  European  Parliament  adopted  an  own-initiative  report  on  13  September  2011  on  this 
matter in reaction to the Commission's Green Paper and urges the Commission to ensure more 
transparency  and  competition  in  the  audit  market6.  The  European  Economic  and  Social 
Committee (EESC) adopted a similar report on 16 June 2011.7  

The issues were also brought to the attention of the Member States at the Financial Services 
Committee meeting of 16 May 2011 and at the Audit Regulatory Committee  meeting  of  24 
June 2011. 

3 

4 

5 
6 
7 

Commission  Proposal  for  a  Regulation  on  statutory  audits  of  annual  accounts  and  consolidated 
accounts of public-interest entities. COM(2011)X, X.X.2011. 
European  Commission,  Green  Paper  on  Audit  Policy:  Lessons  from  the  Crisis,  COM  (2010)561, 
13.10.2010. Available at: 
http://ec.europa.eu/internal_market/consultations/docs/2010/audit/green_paper_audit_en.pdf  
http://ec.europa.eu/internal_market/accounting/conferenc_20110209_en.htm 
http://www.europarl.europa.eu/oeil/FindByProcnum.do?lang=en&procnum=INI/2011/2037 
COM(2010)561 final, OJ C 248, 25.8.2011, p. 92. 

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3. 

IMPACT ASSESSMENT 

In  line  with  its  "Better  Regulation"  policy,  the  Commission  services  conducted  an  impact 
assessment  of  the  different  policy  options.  Among  the  different  issues  that  were  examined, 
some concerned only the statutory audit of public-interest entities (PIEs) while others related 
to statutory audit in general. The conclusion was that there was a need for more detailed rules 
concerning the audit of PIEs and a separate legal instrument would be required for this. The 
Statutory Audit Directive would maintain its general scope.  

Regarding the issues within the scope of the latter, the following problems were examined: 

– 

– 

– 

– 

– 

High level of administrative burden resulting from fragmented national regulation; 

Provision  of  cross-border  statutory  audits  allowed  only  if  an  auditor  passes  an 
aptitude test and gets approved and registered in every Member State; 

Lack  of  common  standards  across  the  EU  on  audit  practice,  independence,  internal 
control of audit firms; 

Auditing  standards  do  not  take  into  account  the  size  of  the  audited  companies,  in 
particular of SMEs; 

Associated problems regarding supervision of non-PIEs. 

Further to the additional compliance cost, this results in the absence of a level playing field 
for  audit  firms  and  statutory  auditors  across  the  Union  and  low  business  potential  for  small 
and medium-sized practitioners (SMPs). 

The impact assessment concluded that the best options to improve the existing situation would 
be: 

– 

– 

– 

Facilitation of the cross-border recognition of audit providers' competence: principle 
of mutual recognition of audit firms and statutory auditors across the Union; 

Streamlining of the standards on audit practice, independence and internal control of 
audit  firms  across  the  Union  through  the  introduction  of  international  auditing 
standards  in  order  to  ensure  that  auditing  standards  are  the  same  across  the  Union; 
national additions would be acceptable, where necessary; 

Adaptation of audit standards to the size of the audited entity by requesting Member 
States to ensure that a proportionate and simplified audit for SMEs is possible. 

These issues concerned all statutory auditors and audit firms which perform statutory audits of 
entities  which  are  not  public-interest  entities.  In  addition  to  those  matters,  the  impact 
assessment covered other areas that related to the statutory audit of PIEs only.  

The  different  policy  options  and  their  impact  on  stakeholders  are  discussed  at  length  in  the 
impact assessment which is available at the following website:  

http://ec.europa.eu/internal_market/auditing/index_en.htm. 

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4. 

LEGAL ELEMENTS OF THE PROPOSAL 

4.1.  Legal basis 

The  amending  Directive  has  the  same  legal  basis  as  the  Statutory  Audit  Directive.  The 
proposal is based on Article 50 of the Treaty on the functioning of the EU, which requires the 
adoption of a Directive for establishment-related matters (e.g. those dealing with professional 
qualifications). The amended Directive is EEA relevant.  

The  new  amended  Directive  will  coexist  with  a  Regulation  on  specific  requirements 
concerning statutory audit of public-interest entities.  

4.2. 

Subsidiarity and proportionality principle 

In accordance with the principles of subsidiarity and proportionality as set out in Article 5 of 
the TEU, the objectives of the proposal cannot be sufficiently achieved by Member States and 
can  therefore  be  better  achieved  at  the  Union  level.  In  particular,  the  facilitation  of  cross-
border mobility of statutory auditors and audit firms across the Union could not be achieved 
without  intervention  at  the  Union  level.  Thus,  the  Commission  proposal  respects  the 
subsidiarity principle, as it aims at overcoming the obstacles to the development of a single 
market  for  statutory  audit  services  and  those  identified  during  the  open  stakeholder 
consultation. In addition, the amended Directive leaves discretion to Member States on how to 
adapt  the  audit  standards  to  the  size  of  the  audited  entity  that  should  result  in  better  audit 
services  to  the  SMEs  concerned.  Moreover,  the  proposal  respects  the  principle  of 
proportionality because all solutions have been drafted keeping cost-efficiency in mind. The 
proposal does not go beyond what is necessary to achieve the objectives pursued.  

4.3.  Detailed explanation of the proposal 

The main modifications to the Statutory Audit Directive are: 

1)  Articulation  between  the  Statutory  Audit  Directive  and  an  additional  legal  instrument  on 
specific requirements for the statutory audit of PIEs (Article 1) 

The  Commission  proposes  that  the  amended  Statutory  Audit  Directive  coexists  with  the 
Regulation on specific requirements on the statutory audit of annual financial statements and 
consolidated financial statements of public-interest entities. Thus, a clear articulation between 
the two legal texts is needed. The current provisions in the Statutory Audit Directive that only 
relate  to  the  performance  of  a  statutory  audit  on  the  annual  and  consolidated  financial 
statements of the public-interest entities would be integrated and, as appropriate, amended in 
the  Proposal  of  a  Regulation  on  specific  requirements  on  the  statutory  audits  of  annual 
financial statements and consolidated financial statements of PIEs. As a consequence, Articles 
39 to 44 and Article 22(2) in fine should be deleted.  

Moreover,  Article  1  deals  with  the  applicability  of  the  amended  Directive  to  the  statutory 
audit  of  PIEs.  Articles  3  to  20  (on  the  access  to  the  market  of  auditors)  apply  to  statutory 
auditors and audit firms, irrespective of the type of audited entity. However, for the rest of the 
Articles of the Directive, the situation is different: Article 22 on independence and objectivity, 
Article 25 on audit fees, Article 27 and Article 28 on audit reporting, as well as Articles 29 to 
31 on quality assurance, investigations and penalties would not apply to the statutory audit of 
PIEs.  On  these  issues  specific  more  detailed  rules  would  be  enacted  in  the  Regulation. 
Articles  32  to  36  regarding  supervision  would  only  apply  to  the  statutory  audit  of  PIEs  as 

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regards supervision of compliance with Articles 3 to 20. Finally, other Articles apply to audits 
of PIEs and are completed by the Regulation on specific requirements (Articles 21, 23, 24, 26, 
37 and 38). 

2)  Definition  of  "statutory  audit"  in  order  to  take  account  of  the  new  accountancy  directive 
(Article 2) 

The  Commission  also  proposes  a  change  in  the  definition  of  "statutory  audit".  Firstly,  the 
statutory audit will continue to cover the instances where different Union legal texts impose 
an obligation on some undertakings to have their financial statements audited, depending on 
their legal form or on their activity. In order to guarantee the unicity of audit, the definition of 
"statutory  audit"  should  also  cover  situations  where  Member  States  decide  to  impose  an 
obligation on small undertakings to have their financial statements audited.8 Lastly, where a 
small  undertaking  decides  voluntarily  to  have  its  financial  statements  audited,  such  audit 
should also be considered a statutory audit. 

3) Modification of the ownership rules (Article 3 and Article 22 (2)) 

Another change to the Statutory Audit Directive concerns the liberalization of the ownership 
rules  of  audit  firms.  Currently,  the  Statutory  Audit  Directive  requires  that  a  majority  of  the 
voting rights in an audit firm is held by licensed accountant practitioners. This requirement is 
no longer stipulated in the proposed amendment and Member States are forbidden to require 
that a minimum of capital or of voting rights in an audit firm is held by statutory auditors or 
audit firms. However, the new Article 3(4) maintains the existing requirement that a majority 
of the members of the administrative or management body of the audit firm are audit firms or 
statutory auditors. 

Permitting broader ownership should facilitate audit firms' access to capital which may result 
in  increasing  the  number  of  providers  of  audit  and  might  encourage  new  entrants  into  the 
market, including through expanded capital-raising in public markets. 

4) Passport for audit firms (Articles 3b, Article 15 and 17) 

The proposal for an amended Directive would allow audit firms to provide statutory audits in 
Member States other than the Member State in which they have been approved, provided that 
the  key  audit  partner  leading  the  audit  is  approved  as  an  auditor  in  the  concerned  Member 
State. As a consequence, the burden that a multitude of approval procedures entails would be 
reduced and at the same time this would allow for the emergence of real pan-European audit 
firms.  This  automatic  recognition  of  firms  would  not  result  in  a  reduction  of  supervisory 
quality as supervisors will continue to be required to oversee audit work carried out in their 
respective Member State.  

However, once approval is obtained in the home Member State, the host Member State may 
require some form of registration of audit firms from other Member States. This registration 
should  be  carried  out  in  accordance  with  Articles  15  and  17,  which  also  concern  the 
registration of any local audit firm.  

8 

Following the Commission proposal recasting the 4th Company Law Directive 78/660/EEC and the 7th 
Council Directive 83/349/EEC, the audit of accounts of small companies will no longer be required in 
EU law.  

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5)  Passport  for  statutory  auditors  (Article  3a)  and  "softening"  the  conditions  for  a  statutory 
auditor to be approved in a different Member State (Article 14) 

The proposed modifications regarding the approval of statutory auditors from other Member 
States  are  aligned  with  the  provisions  of  the  Directive  2005/36  on  the  recognition  of 
professional qualifications (Professional Qualifications Directive)9.  

Article 3a would allow statutory auditors to provide cross-border statutory audit services on a 
temporary  or  occasional  basis.  The  conditions  of  Articles  5  to  9  of  the  Professional 
Qualifications Directive would apply, notably the obligation to communicate the intention to 
provide the services in question to the relevant competent authority. 

The  amended  Article  14  provides  a  Member  State  with  the  possibility  to  offer  the  statutory 
auditor  who  is  approved  in  another  Member  State  the  choice  between  an  adaptation  period 
and an aptitude test, if such auditor wants to set up a permanent establishment in that Member 
State.  

Regarding  the  requirements  of  the  aptitude  test,  there  are  no  substantial  modifications  from 
the  previous  drafting  of  Article  14.  The  test  should  be  aimed  at  assessing  the  statutory 
auditor's knowledge of the laws and regulations of that Member State that are relevant for the 
carrying out of the statutory audit.  

During the adaptation period, which should be offered to the applicant as an alternative to the 
aptitude test, the statutory auditor would be allowed to conduct statutory audit in the Member 
State,  other  than  the  one  in  which  he  or  she  is  approved,  under  the  supervision  of  a  local 
auditor. The length of the adaptation period is three years.  

Concerning supervision of statutory auditors from other Member States, the public authority 
that would be responsible for the status of the statutory auditor and for the assessment of the 
training acquired during the adaptation period is the competent authority of the host Member 
State, as it is the most suitable one.  

6)  Requirements  to  competent  authorities  to  cooperate  regarding  educational  requirements 
and aptitude test (Article 6 and Article 14) 

In  order  to  ensure  more  convergence  of  the  educational  qualifications  of  auditors  at  Union 
level,  the  competent  national  authorities  in  charge  of  the  public  oversight  for  statutory 
auditors  must  cooperate.  Cooperation  at  Union  level  is  also  necessary  to  harmonise  the 
requirements  of  the  aptitude  test  for  statutory  auditors  to  render  it  more  predictable  and 
transparent.  

7) Auditing standards and audit reporting (Article 26) 

In  order  to  enhance  the  quality  of  statutory  audits  performed  in  the  Union,  the  proposal 
requires  Member  States  to  ensure  that  statutory  auditors  and  audit  firms  carry  out  audits  in 
accordance with the international auditing standards.  

As the Proposal for a Regulation on the specific requirements on the statutory audit of public-
interest entities comprises detailed provisions on the audit report, Article 28(2) is deleted. 

9 

OJ L 255, 30.9.2005, p. 22. 

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8) New rules regarding competent authorities (Articles 32 and 32a) 

Presently,  the  Statutory  Audit  Directive  requires  Member  States  to  organise  a  system  of 
public  oversight  for  statutory  auditors  and  audit  firms.  In  practice,  this  allows  professional 
bodies to be responsible, among others, for the approval and registration of statutory auditors 
and audit firms and their external quality assurance, investigations and disciplinary measures. 
The new amendment states that the competent authority responsible for public oversight will 
be  a  public  authority  that  will  be  also  responsible  for  approval  (Article  3  and  Article  32), 
registration (Article 15) and quality assurance (Article 29). 

In order to ensure that the public authorities for auditors' oversight exercise their functions in 
an independent and effective manner, they must also have appropriate powers and resources 
for carrying out investigations and access to relevant documents held by statutory auditors or 
audit firms (Article 32(5)). While it should not be possible any longer that a professional body 
is responsible for the tasks enumerated in Article 32, the competent authority responsible for 
the public oversight may delegate some of its tasks to other authorities or bodieswith regard to 
the  approval  and  registration  of  the  statutory  auditors  and  audit  firms  (Article  32a).  Such 
delegation  must  be  subject  to  several  conditions  and  the  body  which  bears  the  ultimate 
responsibility  is  the  competent  authority  as  referred  to  in  the  first  paragraph  of  Article  32. 
Member States shall inform each other of the delegations granted.  

9) Prohibition of contractual clauses influencing the appointment of statutory auditors or audit 
firms (Article 37(3)) 

In  the  context  of  the  appointment  of  statutory  auditors  and  audit  firms,  Article  37  prohibits 
clauses according to which a third party suggests, recommends or requires the audited entity 
to appoint a specific statutory auditor or audit firm.  

10) Special rules for the statutory audit of small and medium-sized undertakings (Articles 43a 
and 43b) 

Following the recent Commission proposal, small undertakings would no longer be required 
by  EU  law  to  have  their  financial  statements  audited10,  although  Member  States  may  still 
require it. However, the requirement will continue to apply to medium-sized undertakings.  

When  medium-sized  undertakings  are  audited  pursuant  to  EU  law,  the  amended  Directive 
requires Member States to ensure that the way in which the auditing standards are applied are 
adapted  to  the  dimension  and  scale  of  those  undertakings.  Moreover,  small  undertakings 
having  their  accounts  audited  either  because  required  by  national  law  or  voluntarily,  should 
also benefit from this proportionate application of the standards. This calibration of the audit 
to the size of the audited entity should result in better audit services to the small and medium-
sized undertakings concerned and possibly lower cost. The proposed measure does not define 
in  detail  how  proportionate  application  of  the  standards  must  be  done;  applying  the 
subsidiarity principle, this is left to the discretion of Member States.  

10 

Commission  Proposal  for  a  Directive  of  the  European  Parliament  and  the  Council  on  the  annual 
financial  statements,  consolidated  financial  statements  and  related  reports  of  certain  types  of 
undertakings, COM(2011)684 final, 25.10.2011. 

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It is important to underline, that where a small or medium-sized undertaking is a PIE, it is the 
provisions  contained  in  the  draft  Regulation  on  specific  requirements  on  statutory  audit  of 
public-interest entities that would apply. 

11) Special rules regarding delegated and implementing powers, following the entry into force 
of the Treaty of Lisbon (Article 48a; 48b; 48c) 

Articles 8(3), 22(4), 29(2), 36(7), 45(6), 46(2), 47(3) and 47(5) (delegated and implementing 
acts)  align  the  committee  procedures  to  Articles  290  and  291  TFEU  which  set  out  the  new 
framework  for  the  implementing  powers  of  the  Commission.  In  respect  of  powers  of  the 
Commission to adopt implementing acts under Article 291 TFEU, such powers are governed 
by  Regulation  (EU)  No  182/2011  of  the  European  Parliament  and  of  the  Council  of  16 
February  2011  laying  down  the  rules  and  general  principles  concerning  mechanisms  for 
control by the Member States of the Commission's exercise of implementing powers.11. 

The alignment is done on a case by case basis in order to allow for a review of the powers 
conferred by the legislators to the Commission. The implementing powers of the Commission 
are thus reviewed to allow certain elements of the  Directive to be specified, updated  and to 
allow  the  Commission  to  take  measures  to  facilitate  cooperation,  on  one  hand  between  the 
auditor and the competent authorities of Member States, and, on the other hand, between the 
latter and those of third countries in several areas covered by the Directive. 

The new Articles 48a, 48b and 48c specify the way in which the Commission shall exercise 
the delegated powers, the cases in which the delegation may be revoked by the legislators and 
the cases in which the European Parliament or the Council may object to a delegated act. 

5. 

BUDGETARY IMPLICATION  

The Commission's proposal has no direct or indirect impact on the European Union budget.  

11 

OJ L 55, 28.2.2011, p. 13. 

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2011/0389 (COD) 

Proposal for a 

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

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 Committee1,  

Acting in accordance with the ordinary legislative procedure, 

Whereas: 

(1) 

Directive 2006/43/EC of the European Parliament and of the Council of 17 May 2006 
on  statutory  audits  of  annual  accounts  and  consolidated  accounts,  amending  Council 
Directives 78/660/EEC and 83/349/EEC and repealing Council Directive 84/253/EEC 
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 them, as well as the framework for their public supervision. However, it is 
necessary  to  further harmonize  those  rules at  Union  level  in  order  to  allow  for  more 
transparency  and  predictability  of  the  requirements  applying  to  such  persons  and  to 
enhance  their  independence  and  objectivity  in  the  performance  of  their  tasks. 
Moreover,  in  order  to  reinforce  investor  protection  it  is  important  to  strengthen  the 
public oversight of statutory auditors and audit firms by enhancing the independence 
of Union public oversight authorities and entrusting them with adequate powers. 

(2) 

Because  of  the  significant  public  relevance  of  public-interest  entities,  which  arises 
from the scale and dimension 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. Therefore, the special provisions for the statutory audits of public-interest 
entities  set  out  in  Directive  2006/43/EC  have  been  further  developed  in  Regulation 

1 

OJ C , p. . 

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(3) 

(4) 

(5) 

(EU)  No  [XXX]  of  [XXX]  on  specific  requirements  for  the  audit  of  public  interest 
entities.  As  a  consequence,  the  provisions  on  the  statutory  audits  of  public-interest 
entities  of  Directive  2006/43/EC  should  be  deleted  from  that  Directive  and  statutory 
audits of public-interest entities should be regulated by Regulation (EU) No [XXX] of 
[XXX].  

In order to allow audit firms to grow, Member States should allow them to have access 
to external capital. Therefore, Member States should no longer require that a minimum 
amount of capital or of voting rights in an audit firm is held by statutory auditors or 
audit  firms,  provided  that  a  majority  of  the  members  of  the  administrative  body  are 
audit firms approved in any Member State or statutory auditors of good repute. 

In accordance with the Treaty, 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 offering them the 
possibility  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,  establish  financial  statements  in  several 
Member  States  and  must  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.  

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. Therefore, 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.  Such  measure 
should  take  account  of  the  statutory  auditor's  professional  experience.  It  should  not 
lead  to  a  disproportionate  burden  on  the  statutory  auditor  concerned  nor  hinder  or 
render  less  attractive  the  provision  of  statutory  audit  services.  The  statutory  auditor 
concerned  should  be  allowed  to  choose  between  an  aptitude  test  and  an  adaptation 
period such as defined in Directive 2005/36/EC of the European Parliament and of the 
Council of 7 September 2005 on the recognition of professional qualifications2. 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. 

(6) 

In  order  to  enhance  the  independence  of  statutory  auditors  and  audit  firms  from  the 
audited entity when carrying out statutory audits, any person or entity that holds rights 
in an audit firm should be independent of the audited entity and should not be involved 
in the process of decision making of the audited entity. 

(7) 

It is important to ensure high quality statutory audits within  the Union. All statutory 
audits  should  therefore  be  carried  out  on  the  basis  of  the  international  auditing 

2 

OJ L 255, 30.9.2005, p. 22. 

EN 

11 

   EN 

 
                                                 
(8) 

(9) 

standards which are part of the Clarity Project issued by the International Federation 
of  Accountants  (IFAC)  in  2009  insofar  as  they  are  relevant  to  statutory  audits. 
Member  States  should  be  allowed  to  impose  additional  national  audit  procedures  or 
requirements only if they stem from specific national legal requirements relating to the 
scope  of  the  statutory  audit  of  annual  or  consolidated  financial  statements,  meaning 
that  those  requirements  have  not  been  covered  by  the  adopted  international  auditing 
standards,  and  only  if  they  add  to  the  credibility  and  quality  of  annual  financial 
statements  and  consolidated  financial  statements  and  are  conducive  to  the  Union 
public good. The Commission should continue to be involved in the monitoring of the 
content and adoption process of the international auditing standards by the IFAC. 

In order to enhance the credibility and transparency of the quality assurance reviews 
performed in the Union, Member States' quality assurance systems should be governed 
by  the  competent  authorities  designated  by  the  Member  States  to  ensure  the  public 
oversight  of  statutory  auditors  and  audit  firms.  Quality  assurance  reviews  aim  at 
preventing or addressing potential deficiencies in the manner in which statutory audits 
are carried out. In order to ensure that the quality assurance reviews attain their scope, 
when performing the reviews, the competent authorities should take into account the 
scale and dimension of the activity of the statutory auditors and audit firms.  

The public oversight of statutory auditors and audit firms encompasses the approval, 
registration  of  statutory  auditors  and  audit  firms,  the  adoption  of  standards  on 
professional  ethics  and  internal  quality  control  of  audit  firms,  the  continuing 
education, as well as the systems of quality assurance, investigation, and penalties for 
statutory auditors and audit firms. In order to enhance the transparency of the auditor 
supervision and to allow for more accountability, each Member State should designate 
a  single  authority  in  charge  of  the  public  oversight  of  statutory  auditors  and  audit 
firms. The independence of such public oversight authorities from the audit profession 
is  a  core  prerequisite  for  integrity,  efficiency  and  orderly  functioning  of  the  public 
oversight  of  statutory  auditors  and  audit  firms.  Therefore,  the  public  oversight 
authorities  should  be  governed  by  non-practitioners  and  Member  States  should 
establish independent and transparent procedures for the selection of non-practitioners. 

(10) 

In order to ensure that the public oversight authorities fulfil their tasks in an effective 
manner,  they  should  have  sufficient  powers  to  do  so.  In  particular,  Member  States 
should ensure that the public oversight authorities have the power to initiate and carry 
out  investigations,  and  that  they  have  access  to  any  documents  held  by  statutory 
auditors  or  audit  firms  relevant  to  the  performance  of  their  tasks.  In  addition,  the 
public  oversight  authorities  should  have  enough  human  and  financial  resources  to 
perform their tasks. 

(11)  Adequate  supervision  of  statutory  auditors  and  audit  firms  that  have  cross-border 
activities  or  are  part  of  networks  requires  the  public  oversight  authorities  of  the 
Member States to exchange information. In order to protect the confidentiality of the 
information  that  may  be  thus  exchanged,  Member  States  should  subject  to  the 
obligation  of  professional  secrecy  not  only  the  employees  of  the  public  oversight 
authorities,  but  also  all  persons  to  whom  the  public  oversight  authorities  have 
delegated tasks. The competent authority should have the possibility to delegate tasks 
to other authorities or bodies only with regard to the approval and registration of the 
statutory  auditors.  Such  delegation  should  be  subject  to  several  conditions  and  the 
competent authority should bear the ultimate responsibility for it.  

EN 

12 

   EN 

 
(12)  The  "Small  Business  Act"3  adopted  in  June  2008  and  revised  in  February  20114 
recognises  the  central  role  played  by  small  and  medium-sized  enterprises  in  the 
Union's economy and aims at improving the overall approach to entrepreneurship and 
to  anchor  the  "Think  Small  First"  principle  in  policy  making.  The  Europe  2020 
Strategy5  adopted  in  March  2010  also  calls  for  an  improvement  of  the  business 
environment,  especially  for  small  and  medium-sized  enterprises,  including  through 
reducing the transaction costs of doing business in the Union. Article [34] of Directive 
[XXX]  of  the  European  Parliament  and  of  the  Council  of  [XXX]  on  the  annual 
financial  statements,  consolidated  financial  statements  and  related  reports  of  certain 
types  of  undertakings  does  not  require  small  undertakings  to  have  their  financial 
statements audited. 

(13)  The  burdens  weighing  on  small  and  medium-sized  undertakings  within  the  Union  in 
connection  to  the  audit  of  their  financial  statements  should  be  reviewed  to  the 
necessary minimum without compromising investor protection. Member States should 
ensure that the application of auditing standards according to which the statutory audit 
of the financial statements of those undertakings is performed is proportionate to the 
scale of small and medium-sized undertakings. 

(14)  Some  Member  States  have  replaced  the  statutory  audit  of  small  undertakings  with  a 
limited  review  of  their  financial  statements.  It  is  appropriate  to  allow  those  Member 
States to maintain this practice instead of providing for a proportionate application of 
auditing standards to small undertakings. 

(15) 

In order to preserve the rights of the parties concerned when the competent authorities 
of  Member  States  cooperate  with  the  competent  authorities  of  third  countries  on  the 
exchange  of  audit  working papers or  other relevant documents for the assessment of 
the  quality  of  the  audit  performed,  Member  States  should  ensure  that  the  working 
arrangements entered into by their competent authorities based on which any exchange 
of such papers takes place comprise enough safeguards to protect the business secrecy, 
commercial  interests,  including  the  industrial  and  intellectual  property  rights  of  the 
audited entities. 

(16)  The threshold of EUR 50 000 in Article 45(1) of Directive 2006/43/EC was aligned on 
Article 3(2)(c) and (d) of Directive 2003/71/EC of the European Parliament and of the 
Council  of  4  November  2003  on  the  prospectus  to  be  published  when  securities  are 
offered to the public or admitted to trading and amending Directive 2001/34/EC6. The 
thresholds  set  out  in  Directive  2003/71/EC  have  been  increased  to  EUR  100  000  by 
Article 1(3) of Directive 2010/73/EU of the European Parliament and of the Council7. 
For that reason, corresponding adjustments should be made to the threshold set out in 
Article 45(1) of Directive 2006/43/EC. 

3 

4 

5 

6 
7 

Communication  from  the  Commission  to  the  Council,  the  European  Parliament,  the  European 
Economic  and  Social  Committee  and  the  Committee  of  the  Regions  –  A  "Small  Business  Act"  for 
Europe {SEC(2008)2102}. 
Communication  from  the  Commission  to  the  European  Parliament,  the  Council,  the  European 
Economic and Social Committee and the Committee of the Regions – Review of the "Small Business 
Act" for Europe COM(2011)78 final. 
Communication  from  the  Commission  Europe  2020-  A  Strategy  for  smart,  sustainable  and  inclusive 
growth, COM(2010)2020 final. 
OJ L 345, 31.12.2003, p. 64. 
OJ L 327, 11.12.2010, p. 1. 

EN 

13 

   EN 

 
                                                 
(17) 

In  order  to  give  full  effect  to  the  new  framework  provided  for  in  the  Treaty  on  the 
Functioning  of  the  European  Union,  it  is  necessary  to  adapt  and  replace  the 
implementing  powers  designed  under  Article  202  of  the  Treaty  establishing  the 
European Community with the appropriate provisions in accordance with Articles 290 
and 291 of the Treaty on the Functioning of the European Union.  

(18)  The alignment of the procedures for the adoption of delegated and implementing acts 
by  the  Commission  to  the  Treaty  on  the  Functioning  of  the  European  Union  and,  in 
particular, to Articles 290 and 291 thereof, should be effected on a case-by-case basis. 
The  power  to  adopt  acts  in  accordance  with  Article  290  of  the  Treaty  on  the 
Functioning of the European Union should be delegated to the Commission in order to 
take  into  account  the  developments  in  auditing  and  the  audit  profession  and  to 
facilitate the supervision of statutory auditors and audit firms. In particular, the use of 
delegated  acts  is  necessary  to  specify  the  requirements  regarding  the  approval  of 
natural persons as statutory auditors and the principles of independence and objectivity 
that  statutory  auditors  and  audit  firms  have  to  comply  with,  and  to  amend  the 
definition of international auditing standards. In the field of auditor supervision the use 
of  delegated  acts  is  necessary  to  develop  the  procedures  for  the  exchange  of 
information  between  the  competent  authorities  of  Member  States,  the  modalities  in 
which cross-border investigations should take place and the modalities of cooperation 
between the competent authorities of Member States and those of third countries. It is 
of  particular  importance  that  the  Commission  carries  out  appropriate  consultations 
during its preparatory work, including at expert level. 

The  Commission,  when  preparing  and  drawing  up  delegated  acts,  should  ensure  a 
simultaneous,  timely  and  appropriate  transmission  of  relevant  documents  to  the 
European Parliament and to the Council. 

(19) 

In order to ensure uniform conditions for the implementation of the declarations on the 
equivalence  of  third  country  auditor  oversight  regimes  or  the  adequacy  of  third 
country competent authorities, in so far as they concern  individual  third countries or 
individual  competent  authorities  of  third  countries,  implementing  powers  should  be 
conferred on the Commission. Those powers should be exercised in accordance with 
Regulation  (EU)  No  182/2011  of  the  European  Parliament  and  of  the  Council  of  16 
February  2011  laying  down  the  rules  and  general  principles  concerning  mechanisms 
for  control  by  the  Member  States  of  the  Commission's  exercise  of  implementing 
powers8. 

(20)  Since  the  objective  of  this  Directive,  namely  reinforcing  investor  protection  in  the 
financial  statements  published  by  undertakings  by  further  enhancing  the  quality  of 
statutory audits that are performed within the Union cannot be sufficiently achieved by 
Member States and can therefore, by reason of its scale and effects, be better achieved 
at  Union  level,  the  Union  may  adopt  measures  in  accordance  with  the  principle  of 
subsidiarity  as  set  out  in  Article  5  of  the  Treaty  on  European  Union.  In  accordance 
with the principle of proportionality, as set out in that Article, this Directive does not 
go beyond what is necessary in order to achieve that objective. 

(21)  Directive 2006/43/EC should therefore be amended accordingly, 

8 

OJ L 55, 28.2.2011, p. 13. 

EN 

14 

   EN 

 
                                                 
HAVE ADOPTED THIS DIRECTIVE: 

Article 1 

Amendments 

Directive 2006/43/EC is hereby amended as follows: 

1. 

Article 1 is amended as follows: 

(a)  The following paragraphs are added: 

‘Articles 22, 25 and 27 to 30 of this Directive shall not apply to the statutory 
audit  of  annual  and  consolidated  accounts  of  public-interest  entities  unless 
specified in Regulation (EU) No [xxx]. 

Articles  32  to  36  of  this  Directive  shall  apply  with  regard  to  public-interest 
entities in so far as related to the supervision of the compliance with the rules 
on  approval  and  registration  of  statutory  auditors  and  audit  firms  set  out  in 
Articles 3 to 20.’. 

2. 

Article 2 is amended as follows: 

(a)  Point 1 is replaced by the following: 

'1. ‘statutory audit’ means an audit of annual accounts or consolidated accounts 
insofar as:  

(a) 

required by Union law;  

(b) 

required by national law as regards small undertakings; 

(c) 

voluntarily conducted by small undertakings;'; 

(b)  Point 10 is replaced by the following: 

'10. ‘competent authorities’ means the authorities designated by law that are in 
charge of the regulation and/or oversight of statutory auditors and audit firms 
or  of  specific  aspects  thereof;  the  reference  to  'competent  authority'  in  a 
specific Article means a reference to the authority responsible for the functions 
referred to in that Article;' ; 

(c) 

point 11 is deleted; 

(d)  Point 13 is replaced by the following: 

‘13. ’public-interest entities’ means: 

(a) 

entities  governed  by  the  law  of  a  Member  State  whose  transferable 
securities are admitted to trading on a regulated market of any Member 

EN 

15 

   EN 

 
State  within  the  meaning  of  point  14  of  Article  4(1)  of  Directive 
2004/39/EC; 

(b) 

(c) 

(d) 

(e) 

credit  institutions  as  defined  in  point  1  of  Article  4  of  Directive 
2006/48/EC of the European Parliament and of the Council(*); 

insurance  undertakings  within  the  meaning  of  Article  13  of  Directive 
2009/138/EC of the European Parliament and of the Council(**); 

entities  governed  by  the  law  of  a  Member  State  which  are  payment 
institutions as defined in point 4 of Article 4 of Directive 2007/64/EC of 
the European Parliament and of the Council(***), unless Article 15(2) of 
that Directive applies;  

entities  governed  by  the  law  of  a  Member  State  which  are  electronic 
money  institutions  as  defined  in  point  1  of  Article  2  of  Directive 
2009/110/EC  of  the  European  Parliament  and  of  the  Council(****), 
unless Article 15(2) of Directive 2007/64/EC applies;  

(f) 

investment  firms  as  defined  in  point  1  of  Article  4(1)  of  Directive 
2004/39/EC;  

(g)  EU alternative investment funds as defined in Article 4(1)(k) of Directive 
2011/61/EC of the European Parliament and of the Council(*****);  

(h)  undertakings for collective investment in transferable securities (UCITS) 
as  defined  in  Article  1(2)  of  Directive  2009/65/EC  of  the  European 
Parliament and of the Council(******); 

(i) 

(j) 

entities  governed  by  the  law  of  a  Member  State  which  are  central 
securities depositories; 

central counterparties as defined in Article 2(1) of Regulation X/XXXX 
of the European Parliament and of the Council(*******)[see proposal for 
a  Regulation  on  OTC  derivatives,  central  counterparties  and  trade 
repositories, COM(2010)484); 

(*) OJ L 177, 30.6.2006, p.1. 

(**) OJ L 335, 17.12.2009, p. 1. 

(***) OJ L 319, 5.12.2007, p.1. 

(****) OJ L 267, 10.10.2009, p. 7. 

(*****) OJ L 174, 1.7.2011, p.1. 

(******) OJ L 302, 17.11.2009, p. 32; 

(*******) OJ L ….' 

(e)  The following points 17 to 20 are added: 

EN 

16 

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’17. ’medium-sized undertakings’ means the undertakings referred to in Article 
3(2) of Directive XX/XX [the directive replacing the 4th and 7th company law 
directives]; 

18. ’small undertakings’ means the undertakings referred to in Article 3(1) of 
Directive  XX/XX  [the  directive  replacing  the  4th  and  7th  company  law 
directives]; 

19. ’home Member State’ means a Member State in which a statutory auditor 
or audit firm is approved in accordance with Article 3(1); 

20.  ’host  Member  State’  means  a  Member  State  in  which  a  statutory  auditor 
approved by his or her Member State seeks to be also approved in accordance 
with Article 14, or a Member State in which a statutory auditor or audit firm 
approved  by  his,  her  or  its  Member  State  provides  statutory  audits  on  a 
temporary  or  occasional  basis,  or  a  Member  State  in  which  an  audit  firm 
approved  by  its  home  Member  State  seeks  recognition  of  such  approval  in 
accordance with Article 3b.'. 

3. 

Article 3 is amended as follows: 

(a) 

paragraph 2 is amended as follows:  

(i) the first paragraph is replaced by the following: 

‘Each  Member  State  shall  designate  the  competent  authority  referred  to  in 
Article  32  as  authority  responsible  for  approving  statutory  auditors  and  audit 
firms.’; 

(ii) the second paragraph is deleted; 

(b)  paragraph 4 is amended as follows: 

(i) in the first subparagraph, point (b) is deleted; 

(ii) in the first subparagraph, point (c) is replaced by the following: 

‘(c)  a  majority  of  the  members  of  the  administrative  or  management  body  of 
the  entity  must  be  audit  firms  which  are  approved  in  any  Member  State  or 
natural  persons  who  satisfy  at  least  the  conditions  imposed  by  Article  4  and 
Articles  6  to  12.  Where  such  a  body  has  no  more  than  two  members,  one  of 
these members must satisfy at least the conditions in this point.’; 

(iii) the second subparagraph is replaced by the following:  

‘Member  States  may  not  set  additional  conditions  in  relation  to  these  points. 
Member  States  shall  not  be  allowed  to  require  that  a  minimum  amount  of 
capital or of voting rights in an audit firm is held by statutory auditors or audit 
firms.’. 

4. 

The following Articles 3a and 3b are inserted: 

EN 

17 

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'Article 3a 

Cross-border provision of services by statutory auditors 

By derogation from Article 3(1) of this Directive, a statutory auditor who is approved 
in  a  Member  State  shall  be  entitled  to  perform  statutory  audits  in  another  Member 
State on a temporary or occasional basis. Articles 5 to 9 of Directive 2005/36/EC of 
the European Parliament and of the Council* shall apply. 

Article 3b 

Recognition of audit firms 

By derogation from Article 3(1), an audit firm which is approved in a Member 
1. 
State  shall  be  entitled  to  perform  statutory  audits  in  another  Member  State  on  a 
temporary, occasional or permanent basis, provided that Article 3(4)(a) is complied 
with. 

2. 
An audit firm that wishes to carry out statutory audits in a Member State other 
than  the  one  in  which  it  has  been  approved  shall  register  with  the  competent 
authority in the host Member State in accordance with Articles 15 and 17. 

3. 
The competent authority in the host Member State shall register the audit firm 
upon  presentation  of  a  certificate  attesting  to  its  registration  with  the  competent 
authority  in  the  home  Member  State.  The  competent  authority  in  the  host  Member 
State may require that the certificate issued by the competent authority in the home 
Member  State  be  not  more  than  three  months  old.  It  shall  inform  the  competent 
authority in the home Member State of its registration. 

* OJ L 255, 30.9.2005, p. 22.’ 

5. 

In Article 6, the following paragraph is added: 

‘The  competent  authorities  referred  to  in  Article  32  shall  cooperate  in  view  of 
achieving  a  convergence  of  the  requirements  set  out  in  this  Article.  They  shall 
cooperate  with  the  European  Securities  and  Markets  Authority  (ESMA)  and  the 
competent authorities referred to in Article X of Regulation [XXX] of [XXX] in so 
far as such convergence relates to the statutory audit of public-interest entities.’ 

6. 

Article 8 is amended as follows: 

(a) 

paragraph 1, point (i) is replaced by the following: 

'(i) 

international auditing standards as referred to in Article 26;' 

(b)  paragraph 3 is replaced by the following:  

‘The  Commission  shall  be  empowered  to  adopt  delegated  acts  in  accordance 
with Article 48a for the purpose of adapting the list of subjects to be included 
in the test of theoretical knowledge referred to in paragraph 1 of this Article. 

EN 

18 

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When  using  such  powers, 
developments in auditing and the audit profession.' 

the  Commission  shall 

take 

into  account 

7. 

Article 14 is replaced by the following: 

'Article 14 

Approval of statutory auditors from another Member State 

1. 
The  competent  authorities  referred  to  in  Article  32  shall  establish  procedures 
for  the  approval  of  statutory  auditors  who  have  been  approved  in  other  Member 
States.  Those  procedures  shall  comply  with  Articles  11  and  12  of  Directive 
2005/36/EC and shall not go beyond the requirements contained in Articles 13 and 
14 of that Directive. 

2.  Member  States  shall  offer  the  applicant  the  choice  between  an  adaptation 
period as defined in point (g) of Article 3(1) of Directive 2005/36/EC and an aptitude 
test  as  defined  in  point  (h)  of  that  Article.  For  the  purposes  of  this  Article,  Article 
14(3) of Directive 2005/36/EC shall not apply. 

The  adaptation  period  shall  not  exceed  three  years  and  shall  be  subject  to  an 
assessment.  

The  aptitude  test  shall  be  conducted  in  one  of  the  languages  permitted  by  the 
language  rules  applicable  in  the  Member  State  concerned.  It  shall  cover  only  the 
statutory auditor’s adequate knowledge of the laws and regulations of that Member 
State in so far as it is relevant to statutory audits. 

3. 
The competent authorities referred to in Article 32 shall cooperate in view of 
achieving  a  convergence  of  the  requirements  of  the  adaptation  period  and  the 
aptitude  test.  They  shall  enhance  the  transparency  and  predictability  of  the 
requirements.  They  shall  cooperate  with  ESMA  and  the  competent  authorities 
referred  to  in  Article  [XXX]  Regulation  [XXX]  of  [XXX]  in  so  far  as  such 
convergence relates to the statutory audits of public-interest entities.’. 

8. 

In Article 15(1), the following subparagraph is added: 

‘The  public  register  shall  be  organized  by  the  competent  authority  referred  to  in 
Article 32.’. 

9. 

In Article 17(1), the following point (j) is added:  

‘if applicable, whether the audit firm is registered pursuant to Articles 3a and 3b.’. 

10. 

11. 

In Article 21, paragraph 2 is deleted.  

Article 22 is amended as follows: 

(a) 

paragraph 1 is replaced by the following: 

EN 

19 

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'1.  Member  States  shall  ensure  that  when  carrying  out  a  statutory  audit,  the 
statutory  auditor  and/or  the  audit  firm  and  any  holder  of  voting  rights  in  the 
audit  firm  is  independent  of  the  audited  entity  and  is  not  involved  in  the 
decision-taking of the audited entity.'  

(b) 

in paragraph 2, the second subparagraph is deleted; 

(c) 

paragraph 4 is replaced by the following: 

‘4. The Commission shall be empowered to adopt delegated acts in accordance 
with Article 48a for the purpose of specifying: 

(a) 

the threats and safeguards referred to in paragraph 2 of this Article; 

(b) 

the  situations  in  which  the  significance  of  the  threats,  as  referred  to  in 
paragraph 2 of this Article, is such that the independence of the statutory 
auditor or audit firm is compromised.’ 

12. 

Article 26 is replaced by the following:  

'Article 26 

Auditing standards 

1.  Member States shall ensure that statutory auditors and audit firms comply with 
international  auditing  standards  when  carrying  out  statutory  audits  as  long  as  those 
standards are in conformity with the requirements of this Directive and of Regulation 
XX/XX. 

Member  States  may  impose  audit  procedures  or  requirements  in  addition  to  the 
international auditing standards only if those audit procedures or requirements stem 
from  specific  national  legal  requirements  relating  to  the  scope  of  statutory  audits. 
Member States shall ensure that those audit procedures or requirements comply with 
the following conditions:  

(a) 

they  contribute  a  high  level  of  credibility  and  quality  to  the  annual  or 
consolidated  financial  statements  in  conformity  with  the  principles  set  out  in 
Article  4(3)  of  Directive  [xxxx]  on  the  annual  financial  statements  and  the 
consolidated financial statements of certain types of undertakings; 

(b) 

are conducive to the Union public good.  

Member  States  shall  communicate  those  audit  procedures  or  requirements  to  the 
Commission, ESMA and other Member States. 

2. 
For  the  purposes  of  paragraph  1,  'international  auditing  standards'  means 
International  Standards  on  Auditing  (ISAs)  and  related  Statement  and  Standards 
which  are  part  of  the  Clarity  Project  issued  by  the  International  Federation  of 
Accountants (IFAC) in 2009 insofar as they are relevant to the statutory audit.  

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3. 
The  Commission  shall  be  empowered  to  adopt  delegated  acts  in  accordance 
with Article 48a for the purpose of amending the definition of international auditing 
standards in paragraph 2 of this Article. When using such powers, the Commission 
shall  take  into  account  any  amendments  brought  to  the  ISAs  by  the  IFAC,  the 
opinion of the Public Interest Oversight Board on such amendments as well as any 
other developments in auditing and the audit profession.’. 

13. 

14. 

In Article 28, paragraph 2 is deleted.  

Article 29 is amended as follows: 

(a) 

paragraph 1 is amended as follows: 

(i) 

point (a) is replaced by the following: 

‘(a)  the  quality  assurance  system  shall  be  governed  by  the  competent 
authority referred to in Article 32 and organized in such a manner 
that it is independent of statutory auditors and audit firms.’; 

(ii) 

the following point (k) is added:  

‘(k)  quality  assurance  reviews  shall  be  appropriate  and  proportionate  in 
view  of  the  scale  and  dimension  of  the  activity  of  the  reviewed 
audit firm or statutory auditor.’; 

(iii) 

the following subparagraph is inserted after point (k): 

’The competent authority referred to in Article 32 shall make available to 
interested parties, upon their request, the report referred to in point (g) of 
the first subparagraph. The competent authority shall make sure that the 
report  disclosed  does  not  undermine  the  commercial  interests  of  the 
audited  entity  under  review,  including  its  industrial  and  intellectual 
property.’; 

(b)  paragraph 2 is replaced by the following: 

’2. The Commission shall be empowered to adopt delegated acts in accordance 
with  Article  48a  for  the  purpose  of  further  specifying  the  requirements 
concerning points (a), (b) and (e) to (j) of the first subparagraph of paragraph 
1.’. 

15. 

Article 32 is amended as follows: 

(a) 

paragraph 1 is replaced by the following: 

‘1.  Member  States  shall  designate  a  competent  authority  responsible  for  the 
public oversight of statutory auditors and audit firms based on the principles set 
out in paragraphs 2 to 7.’; 

(b)  paragraph 3 is replaced by the following: 

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‘3.  The  competent  authority  may  allow  non-practitioners  who  are 
knowledgeable  in  the  areas  relevant  to  statutory  audit  to  be  involved  in  the 
governance  of  the  public  oversight  system,  provided  that  they  are  selected  in 
accordance  with  an  independent  and  transparent  nomination  procedure. 
Practitioners  shall  not  be  allowed  to  be  involved  in  the  governance  of  the 
public oversight system.’; 

(c) 

in paragraph 4, the introductory sentence is replaced by the following: 

‘The  competent  authority  shall  have  the  ultimate  responsibility  for  the 
oversight of:'; 

(d)  paragraph 5 is replaced by the following: 

‘5.  The  competent  authority  shall  have  the  right,  where  necessary,  to  initiate 
and conduct investigations in relation to statutory auditors and audit firms and 
the right to take appropriate action. It shall have adequate resources to initiate 
and conduct such investigations. 

In order to carry out its tasks under this Directive, the competent authority shall 
have  access  to  any  document  in  any  form  held  by  statutory  auditors  or  audit 
firms  and  to  receive  and  retain  a  copy  thereof.  It  shall  also  have  the  right  to 
demand information from any person and if necessary to summon and question 
a person with a view to obtaining information.’; 

(e) 

paragraph 6 is replaced by the following:  

‘6.  The  competent  authority  shall  be  transparent.  This  shall  include  the 
publication of annual work programmes and activity reports’. 

16. 

The following Article 32a is inserted: 

'Article 32a 

Delegation of tasks 

Member  States  may  allow  the  competent  authority  referred  to  in  Article  32  to 
delegate  tasks  to  other  authorities  or  bodies  designated  by  law  only  as  regards  the 
approval  and  registration  of  statutory  auditors  and  audit  firms.  Any  execution  of 
tasks  by  other  authorities  or  bodies  shall  be  expressly  delegated  by  the  competent 
authority. The delegation shall specify the delegated tasks and the conditions under 
which they are to be carried out. The authorities or bodies shall be organized in such 
a  manner  that  there  are  no  conflicts  of  interest.  The  ultimate  responsibility  for 
supervising compliance with this Directive and the implementing measures adopted 
pursuant thereto shall lie with the delegating competent authority. 

Member  States  shall  inform  the  Commission  and  the  competent  authorities  of  the 
other Member States of any arrangement entered into with regard to the delegation of 
tasks, including the precise conditions for regulating the delegations’. 

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17. 

Article 36 is amended as follows: 

(a) 

paragraph 3 is replaced by the following: 

‘3.  Paragraph  2  shall  not  prevent  competent  authorities  from  exchanging 
confidential  information.  Information  thus  exchanged  shall  be  covered  by  the 
obligation  of  professional  secrecy,  to  which  persons  employed  or  formerly 
employed by competent authorities are subject. The obligation of professional 
secrecy shall also apply to any other person to whom the competent authorities 
have delegated tasks in relation to the purposes set out in this Directive.’; 

(b)  paragraph 7 is replaced by the following: 

‘7. The Commission shall be empowered to adopt delegated acts in accordance 
with Article 48a for the purpose of specifying the procedures for the exchange 
of information and the modalities for cross-border investigations provided for 
in paragraphs 2 and 4 of this Article.’. 

18. 

In Article 37, the following paragraph 3 is added: 

‘3. Any contractual clause entered into between the audited entity and a third party 
restricting  the  choice  by  the  general  meeting  of  shareholders  or  members  of  that 
entity  pursuant  to  paragraph  1  to  certain  categories  or  lists  of  statutory  auditors  or 
audit  firms  regarding  the  appointment  of  or  restricting  the  choice  of  a  particular 
statutory auditor or audit firm to carry out the statutory audit of that entity shall be 
null and void.’ 

19. 

20. 

Chapter X is deleted. 

The following Chapter Xa, including Articles 43a and 43b, is inserted: 

'CHAPTER Xa 

SPECIAL PROVISIONS FOR THE STATUTORY AUDIT OF SMALL AND 
MEDIUM-SIZED UNDERTAKINGS 

Article 43a 

Simplified audit for medium-sized undertakings 

Member  States  shall  ensure  that  the  application  of  the  auditing  standards  to  the 
statutory  audit  of  annual  or  consolidated  financial  statements  of  medium-sized 
undertakings  is  proportionate  to  the  scale  and  complexity  of  the  business  of  those 
undertakings.  

When  undertaking  quality  assurance  reviews,  the  competent  authorities  shall  take 
account of the proportionate application of the auditing standards. 

Member  States  may  request  professional  bodies  to  provide  guidance  on  the 
proportionate application of the auditing standards to medium-sized undertakings. 

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Article 43b 

Small undertakings 

Where  a  Member  State  requires  the  statutory  audit  of  the  annual  or  consolidated 
accounts of small undertakings, Article 43a shall apply mutatis mutandis. 

Where a Member State has established rules on the carrying out of a limited review 
of  the  accounts  of  small  undertakings  as  an  alternative  to  statutory  audit,  such 
Member State shall not be obliged to adapt the audit standards to the statutory audit 
of those undertakings. 

For the purposes of this Article, a 'limited review' means a procedure undertaken by a 
statutory auditor or audit firm with a view to detecting misstatements due to error or 
fraud  in  the  financial  statements  of  an  entity  and  which  provides  a  lower  level  of 
assurance than statutory audit.'. 

21. 

Article 45 is amended as follows: 

(a) 

paragraph 1 is replaced by the following:  

'1. 
The competent authorities of a Member State shall, in accordance with 
Article 15, 16 and 17, register every third-country auditor and audit entity that 
provides an audit report concerning the annual or consolidated accounts of an 
undertaking  incorporated  outside  the  Union  whose  transferable  securities  are 
admitted  to  trading  on  a  regulated  market  of  that  Member  State  within  the 
meaning of point 14 of Article 4(1) of Directive 2004/39/EC, except when the 
undertaking  is  an  issuer  exclusively  of  outstanding  debt  securities  for  which 
one of the following applies: 

(a) 

(b) 

they  are  admitted  to  trading  on  a  regulated  market  in  a  Member  State 
within  the  meaning  of  Article  2(1)(b)  of  Directive  2004/109/EC  of  the 
European  Parliament  and  of  the  Council(*)  prior  to  31  December  2010 
the denomination per unit of which is at least EUR 50 000 or, in case of 
debt  securities  denominated  in  another  currency,  equivalent,  at  the  date 
of issue, to at least 50 000;  

they  are  admitted  to  trading  on  a  regulated  market  in  a  Member  State 
within the meaning of Article 2(1)(b) of Directive 2004/109/EC from 31 
December 2010 the denomination per unit of which is at least EUR 100 
000  or,  in  case  of  debt  securities  denominated  in  another  currency, 
equivalent, at the date of issue, to at least EUR 100 000. 

(*)  OJ L 390, 31.12.2004, p.38.'; 

(b)  paragraph 5 is amended as follows: 

(i) 

point (e) is replaced by the following: 

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‘(e)  it  publishes  on  its  website  an  annual  transparency  report  which 
includes the information referred to in Article X of Regulation [XXX] of 
[XXX] or it complies with equivalent disclosure requirements.'; 

(ii) 

the following subparagraph is added: 

'A  Member  State  may  register  a  third-country  auditor  only  if  he  or  she 
meets  the  requirements  set  out  in  points  (a),  (d)  and  (e)  of  the  first 
subparagraph.’; 

(d)  paragraph 6 is replaced by the following: 

‘6. In order to ensure the uniform conditions of application of paragraph 5(d) of 
this  Article,  the  Commission  shall  be  empowered  to  decide  upon  the 
equivalence  referred  to  therein  by  means  of  implementing  acts.  Those 
implementing  acts  shall  be  adopted  in  accordance  with  the  examination 
procedure  referred  to  in  Article  48(2).  Member  States  may  assess  the 
equivalence  referred  to  in  paragraph  5(d)  of  this  Article  as  long  as  the 
Commission has not taken any such decision. 

The  Commission  shall  be  empowered  to  adopt  delegated  acts  in  accordance 
with Article 48a for the purpose of establishing the general equivalence criteria 
to  be  used  when  assessing  whether  the  audits  of  the  financial  statements 
referred  to  in  paragraph  1  of  this  Article  are  carried  out  in  accordance  with 
international  auditing  standards  as  referred  to  in  Article  26  and  the 
requirements  laid  down  in  Articles  22,  24  and  25.  Such  criteria  which  are 
applicable to all third countries shall be used by Member States when assessing 
equivalence at national level.’.  

22. 

In Article 46, paragraph 2 is replaced by the following:  

‘2. In order to ensure uniform conditions of application of paragraph 1 of this Article, 
the  Commission  shall  be  empowered  to  decide  upon  the  equivalence  referred  to 
therein by means of implementing acts. Those implementing acts shall be adopted in 
accordance  with  the  examination  procedure  referred  to  in  Article  48(2).  Once  the 
Commission  has  recognized  the  equivalence  referred  to  in  paragraph  1  of  this 
Article, Member States may decide to rely on such equivalence partially or entirely 
and thus to disapply or modify the requirements in Article 45(1) and (3) partially or 
entirely. Member States may assess the equivalence referred to in paragraph 1 of this 
Article or rely on the assessments carried out by other Member States as long as the 
Commission  has  not  taken  such  a  decision.  If  the  Commission  decides  that  the 
requirement of equivalence referred to in paragraph 1 of this Article is not complied 
with,  it  may  allow  the  auditors  and  audit  entities  concerned  to  continue  their  audit 
activities  in  accordance  with  the  requirements  of  the  relevant  Member  State  during 
an appropriate transitional period.  

The  Commission  shall  be  empowered  to  adopt  delegated  acts  in  accordance  with 
Article 48a for the purpose of establishing the general equivalence criteria, based on 
the  requirements  laid  down  in  Articles  29,  30  and  32,  which  shall  be  used  when 
assessing whether the public oversight, quality assurance, investigation and penalties 
systems of a third country are equivalent to those of the Union. Such general criteria 

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shall be used by Member States when assessing equivalence at national level in the 
absence of a Commission decision in respect of the third country concerned.’. 

23. 

Article 47 is amended as follows: 

(a) 

in paragraph 2, the following point (ba) is inserted: 

‘(ba) the protection of the commercial interests of the audited entity, including 
its industrial and intellectual property is not undermined;’; 

(b)  paragraph 3 is replaced by the following: 

‘3.  In  order  to  facilitate  cooperation,  the  Commission  shall  be  empowered  to 
decide upon the adequacy referred to in paragraph 1(c) of this Article by means 
of implementing acts. Those implementing acts shall be adopted in accordance 
with  the  examination  procedure  referred  to  in  Article  48(2).  Member  States 
shall take the measures necessary to comply with the Commission's Decision.  

The  Commission  shall  be  empowered  to  adopt  delegated  acts  in  accordance 
with Article 48a for the purpose of establishing the general adequacy criteria in 
accordance  with  which  the  Commission  shall  assess  whether  the  competent 
authorities of third countries may be recognized as adequate to cooperate with 
the competent authorities of Member States on the exchange of audit working 
papers  or  other  documents  held  by  statutory  auditors  and  audit  firms.  The 
general  adequacy  criteria  shall  be  based  on  the  requirements  of  Article  36  or 
essentially equivalent functional results to a direct exchange of audit working 
papers or other documents held by statutory auditors or audit firms.’; 

(c) 

paragraph 5 is replaced by the following: 

‘5. The Commission shall be empowered to adopt delegated acts in accordance 
with Article 48a for the purpose of defining the exceptional cases referred to in 
paragraph 4 of this Article in order to facilitate cooperation between competent 
authorities.’. 

24. 

In Article 48, paragraph 1 and 2 are replaced by the following: 

‘1. The Commission shall be assisted by a committee (hereinafter referred to as the 
Committee). That Committee shall be a Committee within the meaning of Regulation 
(EU) No 182/2011 of the European Parliament and of the Council(*). 

2.  Where  reference  is  made  to  this  paragraph,  Article  5  of  Regulation  (EU)  No 
182/2011 shall apply. 

(*) OJ L55, 28.2.2011, p.13.’; 

25. 

The following Article 48a is inserted: 

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'Article 48a 

Exercise of the delegation 

The power to adopt delegated acts is conferred on the Commission subject to 

1. 
the conditions laid down in this Article.  

2. 
The  power  to  adopt  delegated  acts  referred  to  in  Articles  8(3),  22(4),  26(3), 
29(2), 36(7), 45(6), 46(2), 47(3) and 47(5) shall be conferred on the Commission for 
an indeterminate period of time from [date of entry into force of this Directive]. 

The delegation of power referred to in Articles 8(3), 22(4), 26(3), 29(2), 36(7), 
3. 
45(6),  46(2),  47(3)  and  47(5)  may  be  revoked  at  any  time  by  the  European 
Parliament or by the Council. A decision to revoke shall put an end to the delegation 
of  the  power  specified  in  that  decision.  It  shall  take  effect  the  day  following  the 
publication of the decision in the Official Journal of the European Union or at a later 
date specified therein. It shall not affect the validity of any delegated acts already in 
force. 

As  soon  as  it  adopts  a  delegated  act,  the  Commission  shall  notify  it 

4. 
simultaneously to the European Parliament and to the Council. 

A  delegated  act  adopted  pursuant  to  Articles  8(3),  22(4),  26(3),  29(2),  36(7), 
5. 
45(6),  46(2),  47(3)  and  47(5)  shall  enter  into  force  only  if  no  objection  has  been 
expressed either by the European Parliament or the Council within a period of [two 
months] of notification of that act to the European Parliament and the Council or if, 
before the expiry of that period, the European Parliament and the Council have both 
informed the Commission that they will not object. That period shall be extended by 
[two months] at the initiative of the European Parliament or of the Council.'. 

Article 2 

Transposition 

1. 

Member  States  shall  bring  into  force  the  laws,  regulations  and  administrative 
provisions necessary to comply with this Directive by [xxx] at the latest. They shall 
forthwith  communicate  to  the  Commission  the  text  of  those  provisions  and  a 
correlation table between those provisions and this Directive. 

When  Member  States  adopt  those  provisions,  they  shall  contain  a  reference  to  this 
Directive  or  be  accompanied  by  such  a  reference  on  the  occasion  of  their  official 
publication. Member States shall determine how such reference is to be made. 

2. 

Member States shall communicate to the Commission the text of the main provisions 
of national law which they adopt in the field covered by this Directive. 

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Article 3 

Entry into force 

This Directive shall enter into force on the twentieth day following that of its publication in 
the Official Journal of the European Union. 

Article 4 

Addressees  

This Directive is addressed to the Member States. 

Done at Brussels, 

For the European Parliament 
The President 

For the Council 
The President 

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