Activities of Olle SCHMIDT related to 2011/0359(COD)

Proposal for a regulation
Recital 6

(6) The financial sector is evolving and new categories of financial institutions are created by Union law. The importance of new entities and activities outside the regular banking system is growing and their impact on financial stability has become greater. Therefore, it is appropriate that the definition of public-interest entity may also encompasses other financial institutions ~~and entities such as inv~~. Member States may therefore designate other entities as public-interestm ent ~~firms, payment institutions, undertakings for collective investments in transferabl~~ities, for instance entities that are of significant public relevance sbec~~urities (UCITS), electronic money institutions and alternative investment funds.~~ause of the nature of their business, their size or the number of their employees;

2012/10/29
Committee: ECON

Proposal for a regulation
Recital 23

(23) Audit committees, or bodies performing an equivalent function within the audited entity, have a decisive role in contributing to high-quality statutory audit. It is particularly important to reinforce the independence and technical competence of the audit committee by requiring that a majority of its members is independent and that at least one member of the committee has competence in auditing and another one in auditing and/or accounting. Members of the audit committee should take part in skill enhancement programmes to ensure an appropriate level of technical knowledge to fulfil their roles. The Commission Recommendation of 15 February 2005 on the role of non- executive or supervisory directors of listed companies and on the committees of the (supervisory) board26 sets out how audit committees should be established and function. Considering, however, the dimension of boards in companies with reduced market capitalisation and in small and medium-sized public-interest entities, it would be appropriate that the functions assigned to the audit committee for those entities, or to a body performing equivalent functions within the audited entity, may be performed by the administrative or supervisory body as a whole. Public- interest entities which are UCITS or alternative investment funds should also be exempted from the obligation to have an audit committee. This exemption takes into account the fact that where those funds function merely for the purpose of pooling assets, the employment of an audit committee is not appropriate. UCITS and alternative investments funds, as well as their management companies, operate in a strictly defined regulatory environment and are subject to specific governance mechanisms such as controls exercised by their depositary.

2012/10/29
Committee: ECON

Proposal for a regulation
Recital 24

(24) It is also important that the role of the audit committee in the selection of a new statutory auditor or audit firm be reinforced, for the benefit of a more informed decision of the general meeting of shareholders or members of the audited entity. Hence, when making a proposal to the general meeting, the board should explain whether it follows the recommendation of the audit committee and, if not, why. It should equally provide reasons if it proposes to renew an audit engagement following a tender procedure. The recommendation of the audit committee should include at least two possible choices for the audit engagement, a comprehensive assessment of both proposals, and a duly justified preference for one of them, so that the general meeting can make a real choice. In order to provide a fair and proper justification in its recommendation, the audit committee should use the results of a mandatory selection procedure organised by the audited entity, under the responsibility of the audit committee. In such selection procedure, the audited entity should invite statutory auditors or audit firms, including smaller ones, to present proposals for the audit engagement. Tender documents should contain transparent and non- discriminatory selection criteria to be used for the evaluation of proposals. Considering, however, that this selection procedure could entail disproportionate costs for companies with reduced market capitalisation or small and medium-sized public- interest entities having regard to their dimension, it is appropriate to relieve such entities from this obligation.

2012/10/29
Committee: ECON

Proposal for a regulation
Recital 24 a (new)

(24a) When it concerns the renewal of an audit engagement the audit committee shall base its recommendation periodically on a comprehensive assessment of the audit quality of the statutory auditor or audit firm. The comprehensive assessment shall include the consideration of professional competencies of the statutory auditor or audit firm (i.e. industry knowledge, infrastructure, technical know-how, IT competence), which may vary according to the size and complexity of the audited entity. The audit committee shall also consider adherence to relevant rules and regulations as well as to professional standards. The competent authority shall issue guidelines on the criteria of professional competencies to facilitate the selection procedure.

2012/10/29
Committee: ECON

Proposal for a regulation
Recital 26

(26) The appointment of more than one statutory auditor or audit firm by the public-interest entities would reinforce the professional scepticism and contribute to increasing audit quality. Also, this measure combined with the presence of smaller audit firms would facilitate the development of the capacity of such firms, thus contributing to increasing the choice of statutory auditors and audit firms for public-interest entities. Therefore, the latter should be encouraged and incentivised to appoint more than one statutory auditor or audit firm to carry out the statutory audit.deleted

2012/10/29
Committee: ECON

Proposal for a regulation
Recital 27

(27) In order to address the familiarity threat and therefore reinforce the independence of auditors and audit firms, it is important to establish a maximum duration of the audit engagement of a statutory auditor or audit firm in a particular audited entity. An appropriate gradual rotation mechanism should also be established with regard to the most senior personnel involved in the statutory audit, including the key audit partners carrying out the statutory audit on behalf of the audit firm. It is also important to provide for an appropriate period within which such statutory auditor or audit firm may not carry out thFurthermore, a comprehensive, transparent and independent evaluation of audit quality should be regularly and appropriately documented. This comprehensive assessment should form the basis for the auditor selection by the general assembly, which follows a tender procedure at least every 14 years. Furthermore, an appropriate gradual rotation mechanism for financial companies defined in this Regulation should be esta~~tutory audit of the same entity. In order to ensure a smooth transition, the former auditor should transfer a handover file with relevant information to the incoming auditor~~blished with regard to the most senior personnel involved in the statutory audit, including the key audit partners carrying out the statutory audit on behalf of the audit firm.

2012/10/29
Committee: ECON

Proposal for a regulation
Recital 27 a (new)

(27a) The maximum duration of an audit engagement of a public-interest entity which is a financial company shall not exceed 14 years.

2012/10/29
Committee: ECON

Proposal for a regulation
Recital 33

(33) The market for the provision of statutory audit services to public-interest entities evolves over time. It is therefore necessary that competent authorities and ESMA monitor the developments in the market, particularly as regards possible limited choice of auditor and the risks that arise from high market concentration.

2012/10/29
Committee: ECON

Proposal for a regulation
Recital 36 a (new)

(36a) The Proposal for a Regulation of the European Parliament and of the Council on specific requirements regarding statutory audit of public- interest entities envisages that the EU- wide cooperation between competent authorities in respect of the activities of statutory auditors and audit firms that audit the financial statements of public- interest entities would take place within ESMA. Thus ESMA would take over the EU-wide cooperation mechanism that currently takes place under the aegis of the European Group of Auditors' Oversight Bodies (EGAOB), an expert group established and chaired by the European Commission. According to the proposal, ESMA would create a permanent internal committee composed of the competent authorities designated for carrying out the tasks provided for in the draft Regulation. However, auditor public oversight would continue to be carried out at national level. ESMA would be best placed to fulfil the new tasks according to this Regulation in order to ensure an effective and operational cooperation at EU level. The current structure, the EGAOB, cannot ensure supervisory convergence across the Union in respect of auditors conducting audits of public-interest entities that are organised within networks. The EGAOB does not have the power to issue guidelines or even technical standards. The same applies to a Level-3-Lamfalussy-Committee structure where also necessary powers and resources are lacking. An EU-wide cooperation on auditor oversight within ESMA would benefit from the experience and resources of ESMA as ESMA is already working in the field of auditing regarding public-interest entities. ESMA was created on 1 January 2011 and is fully operational. The integration of EU-wide cooperation into ESMA would avoid unnecessary additional costs. Member States would be sufficiently represented and would be part of the decision-making process with ESMA. The Commission shall after a transitional period of X years come back to the European Parliament and the Council with a report where it has ESMA's work and the future role for ESMA. The Commission shall evaluate ESMA has enough resources to fulfil its tasks laid down in this Regulation and propose budget increases if necessary.

2012/10/29
Committee: ECON

Proposal for a regulation
Recital 37

(37) The scope of cooperation between the competent authorities of Member States should include exchange of information, cooperation with regard to quality assurance assurance reviews, assistance to investigations related to the carrying out of statutory audits of public-interest entities, including in cases where the conduct under investigation does not constitute an infringement of any legislative or regulatory provision in force in the Member States concerned and contingency planning. The modalities of cooperation between the competent authorities of the Member States may include the creation of colleges of competent authorities and the delegation of tasks among themselves. The concept of network in which auditors and firms operate should be taken into account in such cooperation. Competent authorities, ESMA and the European Supervisory Authorities should respect appropriate confidentiality and professional secrecy rules.

2012/10/29
Committee: ECON

Proposal for a regulation
Recital 39

(39) The interrelation of capital markets calls for empowering national competent authorities, ESMA and the European Supervisory Authorities to cooperate with supervisory authorities and bodies of third countries regarding the exchange of information or quality assurance reviews. However, where the cooperation with third country authorities is related to audit working papers or other documents held by statutory auditors or audit firms, the procedures of Directive 2006/43/EC should apply.

2012/10/29
Committee: ECON

Proposal for a regulation
Recital 43

(43) In order to take account of developments in auditing and the audit market, the Commission should be empowered to specify technical requirements on the ~~content of the handover file that the new statutory auditor or audit firm should receive and on the~~ establishment of a European quality certificate for statutory auditors and audit firms carrying out statutory audits of public-interest entities.

2012/10/29
Committee: ECON

Proposal for a regulation
Recital 44

(44) In order to take account of the technical developments in the financial markets, in auditing and the audit profession and to specify the requirements laid down in this Regulation, the Commission should be empowered to adopt delegated acts in accordance with Article 290 of the Treaty on the Functioning of the European Union. In particular, the use of delegated acts is necessary to adapt the list of related audit services and of prohibited non-audit services as well as to set out the level of fees that ESMA concerned could charge for delivering the European Quality Certificate to statutory auditors and audit firms. It is of particular importance that the Commission carries out appropriate consultations during its preparatory work, including at expert level and with ESMA. The Commission, when preparing and drawing up delegated acts, should ensure a simultaneous, timely and appropriate transmission of relevant documents to the ESMA, European Parliament and to the Council.

2012/10/29
Committee: ECON

Proposal for a regulation
Recital 45

(45) In order to ensure legal certainty and the smooth transition to the regime introduced by this Regulation, it is important to introduce a transitional regime regarding the entry into force of the obligation to rotate audit firms, the obligation to organise a selection procedure for the choice of audit firm and the conversion of audit firms into firms that only provide audit services.deleted

2012/10/29
Committee: ECON

Proposal for a regulation
Article 3 – paragraph 1

For the purposes of this Regulation, the definitions laid down in Article 2 of Directive 2006/43/EC shall apply, except for the definitions of ‘'audit report~~’ and ‘competent authority’.~~ ', 'competent authority' and 'public-interest entities'. For the purpose of this Regulation 'public-interest entities' shall cover: (a) entities governed by the law of a Member State whose transferable securities are admitted to trading on a regulated market of any Member State within the meaning of point 14 of Article 4(1) of Directive 2004/39/EC; (b) credit institutions as defined in point 1 of Article 4 of Directive 2006/48/EC of the European Parliament and of the Council*; (c) insurance undertakings within the meaning of Article 13 of Directive 2009/138/EC of the European Parliament and of the Council**; (d) 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; (e) 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) entities governed by the law of a Member State which are central securities depositories; (h) 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 187, 18.7.2009, p. 5 **** OJ L 267, 10.10.2009, p. 7

2012/10/29
Committee: ECON

Proposal for a regulation
Article 4

Article 4 Large public interest entities For the purposes of this Regulation, ‘large public-interest entities’ shall cover the following (a) in relation to entities defined in point 13(a) of Article 2 of Directive 2006/43/EC, the largest 10 issuers of shares in each Member State measured by the market capitalisation on the basis of the end-year quotes and in any case all issuers of shares that had an average market capitalisation of more than EUR 1 000 000 000 on the basis of end-year quotes for the previous three calendar years; (b) in relation to entities defined in points 13(b) to (f) of Article 2 of Directive 2006/43/EC, any entity which on their balance sheet date has a balance sheet total exceeding EUR 1 000 000 000; (c) in relation to entities defined in points 13(g) and (h) of Article 2 of Directive 2006/43/EC, any entity which on their balance sheet date has total assets under management exceeding EUR 1 000 000 000.deleted

2012/10/29
Committee: ECON

Proposal for a regulation
Article 5 – paragraph 1

A statutory auditor or audit firm shall take all necessary steps to ensure that the ~~carrying out~~independence of athe statutory auditor ofr a ~~public-interest entity is not affected by any existing or potential conflict of interest or business~~udit firm carrying out the statutory audit is not compromised by financial, personal, business, employment or other relationships involving the statutory auditor or, the audit firm ~~carrying out the statutory audit and, where appropriate, its~~, its affiliate firms and network, managers, auditors, employees, any other natural persons whose services are placed at the disposal or under the control of the statutory auditor or audit firm, or any person directly or indirectly linked tod any natural person in a position to influence the outcome of the statutory audit~~or or audit firm by control~~.

2012/10/29
Committee: ECON

Proposal for a regulation
Article 9 – paragraph 2

2. When the statutory auditor or audit firm provides to the audited entity related financial audit services, as referred to in Article 10(2), the fees for such services shall be limited to no more than 10 % of the fees paid by the audited entity for the statutory audit.deleted

2012/10/29
Committee: ECON

Proposal for a regulation
Article 10 – paragraph 1 – subparagraph 1

A statutory auditor or an audit firm carrying out statutory audit of public- interest entities mashall not directly or indirectly provide to the audited entity, to its parent undertaking and to its controlled undertakings ~~statutory~~ any non-audit services ~~and related financial audit services~~that are prohibited by this Article.

2012/10/29
Committee: ECON

Proposal for a regulation
Article 10 – paragraph 1 – subparagraph 2

Where the statutory auditor belongs to a network, ano member of such network ~~may~~shall provide to the audited entity, to its parent undertaking and to its controlled undertakings within the Union ~~statutory~~any non- audit services ~~or related financial audit services~~that are prohibited by this Article.

2012/10/29
Committee: ECON

Proposal for a regulation
Article 10 – paragraph 2

2. For the purposes of this Article, related financial audit services shall mean: (a) the audit or review of interim financial statements; (b) providing assurance on corporate governance statements; (c) providing assurance on corporate social responsibility matters; (d) providing assurance on or attestation of regulatory reporting to regulators of financial institutions beyond the scope of the statutory audit and designed to assist regulators in fulfilling their role, such as on capital requirements or specific solvency rations determining how likely an undertaking will be to continue meeting its debt obligations; (e) providing certification on compliance with tax requirements where such attestation is required by national law; (f) any other statutory duty related to audit work imposed by Union legislation to the statutory auditor or audit firm.deleted

2012/10/29
Committee: ECON

Proposal for a regulation
Article 10 – paragraph 3 – subparagraph 3 – introductory part

For the purposes of this Article, prohibited non-audit services shall mean:

2012/10/29
Committee: ECON

Proposal for a regulation
Article 10 – paragraph 3 – subparagraph 3 – point a – point i a (new)

(ia) Providing tax services involving acting as an advocate before a public tribunal or court in the resolution of a tax matter and the amounts involved are material to the financial statements;

2012/10/29
Committee: ECON

Proposal for a regulation
Article 10 – paragraph 3 – subparagraph 3 – point a – point i b (new)

(ib) Preparing tax calculations of current and deferred tax liabilities or assets for the purpose of preparing accounting entries that are material to the financial statements;

2012/10/29
Committee: ECON

Proposal for a regulation
Article 10 – paragraph 3 – subparagraph 3 – point a – point i c (new)

(ic) Providing tax or corporate finance advice when the effectiveness of the advice depends upon a particular accounting treatment or presentation in the financial statements and when there is reasonable doubt about the appropriateness of the accounting treatment and the outcome or consequences of the advice would materially affect such financial statements;

2012/10/29
Committee: ECON

Proposal for a regulation
Article 10 – paragraph 3 – subparagraph 3 – point a – point ii

(ii) bookkeeping ~~and preparing~~, payroll services and the preparation of accounting records and financial statements;

2012/10/29
Committee: ECON

Proposal for a regulation
Article 10 – paragraph 3 – subparagraph 3 – point a – point iii

(iii) designing ~~and~~or implementing internal control or, risk management ~~procedure~~or financial information technology systems related to the preparation and/or control of financingal information included in the financial statements ~~and advice on risk~~that;

2012/10/29
Committee: ECON

Proposal for a regulation
Article 10 – paragraph 3 – subparagraph 3 – point a – point iii – point a (new)

a) form a significant part of the internal control over financial reporting of the audited entity, or

2012/10/29
Committee: ECON

Proposal for a regulation
Article 10 – paragraph 3 – subparagraph 3 – point a – point iii – point b (new)

b) generate information that is significant to the accounting records of financial statements that are subject to the statutory audit;

2012/10/29
Committee: ECON

Proposal for a regulation
Article 10 – paragraph 3 – subparagraph 3 – point a – point iv

(iv) valuation services~~, providing fairness opinions or contribution-in-kind repor~~ or litigation support services, where the valuation would have a material effect separately or in the aggregate on the financial statements;

2012/10/29
Committee: ECON

Proposal for a regulation
Article 10 – paragraph 3 – subparagraph 3 – point a – point v

(v) ~~actuarial and legal services, including the resolution of litigation~~legal services consisting of acting as an advocate in the resolution of disputes and litigation where the advocacy services can only be provided by a person admitted to practice law before the courts of a Member State and the amounts involved are material to the financial statements;

2012/10/29
Committee: ECON

Proposal for a regulation
Article 10 – paragraph 3 – subparagraph 3 – point a – point vi

~~(vi) designing and implementing financial information technology systems for public-interest entities as referred to in Article 2(13)(b) to (j) of Directive 2006/43/EC;~~deleted

2012/10/29
Committee: ECON

Proposal for a regulation
Article 10 – paragraph 3 – subparagraph 3 – point a – point viii

(viii) bpro~~ker or dealer, investment adviser, or investment banking services.~~viding corporate finance services involving promoting, dealing in, or underwriting shares of the audited entity;

2012/10/29
Committee: ECON

Proposal for a regulation
Article 10 – paragraph 3 – subparagraph 3 – point a – point viii a (new)

(viiia) human resources services with respect to senior management in a position to exert significant influences over the preparation of the accounting records or financial statement subject to the statutory audit, where such services involve.

2012/10/29
Committee: ECON

Proposal for a regulation
Article 10 – paragraph 3 – subparagraph 3 – point b

(b) services which may entail conflict of interest: (i) human resources services, including recruiting senior management; (ii) providing comfort letters for investors in the context of the issuance of an undertaking's securities; (iii) designing and implementing financial information technology systems for public-interest entities as referred to in Article 2(13)(a) of Directive 2006/43/EC; (iv) due diligence services to the vendor or the buy side on potential mergers and acquisitions and providing assurance on the audited entity to other parties at a financial or corporate transaction.deleted

2012/10/29
Committee: ECON

Proposal for a regulation
Article 10 – paragraph 3 – subparagraph 4

By derogation from the first and second subparagraphs, the services mentioned in point (b)(iii) and (iv) may be provided by the statutory auditor or the audit firm, subject to prior approval by the competent authority referred to in Article 35(1).deleted

2012/10/29
Committee: ECON

Proposal for a regulation
Article 10 – paragraph 3 – subparagraph 5

By derogation from the first and second subparagraphs, the services mentioned in point (b)(i) and (ii) may be provided by the statutory auditor or the audit firm, subject to prior approval by the audit committee as referred to in Article 31 of this Regulation.deleted

2012/10/29
Committee: ECON

Proposal for a regulation
Article 10 – paragraph 3 a (new)

(3a) A statutory auditor or audit firm may provide non-audit services other than prohibited non-audit services where: a. the provision of those services has been approved by the audit committee, in the light of its obligation under Article 31 to satisfy itself as to the auditor's likely ability to mitigate any threats to its independence in its conduct as statutory auditor; and b. the competent authority has not exercised its power under Article 38 – paragraph 6 a (new), to prohibit the provision of those services.

2012/10/29
Committee: ECON

Proposal for a regulation
Article 10 – paragraph 4 – subparagraph 3

Being involved in the decision-taking of the audited entity and the provision of ~~the services referred to in points (ii) and (iii) of paragraph 3(a)~~non- audit services shall be considered as affecting such independence in all cases.

2012/10/29
Committee: ECON

Proposal for a regulation
Article 10 – paragraph 4 – subparagraph 4

~~The provision of the services referred to in points (i) and (iv) to (viii) of paragraph 3(a) shall be presumed to affect such independence.~~deleted

2012/10/29
Committee: ECON

Proposal for a regulation
Article 10 – paragraph 5

5. Where an audit firm generates more than one third of its annual audit revenues from large public-interest entities and belongs to a network whose members have combined annual audit revenues which exceed EUR 1 500 million within the European Union, it shall comply with the following conditions: (a) it shall not directly or indirectly provide to any public interest entity non- audit services; (b) it shall not belong to a network which provides non-audit services within the Union; (c) any entity which provides the services listed in paragraph 3 shall not directly or indirectly hold more than 5 % of the capital or of the voting rights in the audit firm; (d) the entities which provide the services listed in paragraph 3shall not directly or indirectly hold together more than 10 % of the capital or of the voting rights in the audit firm; (e) such audit firm shall not directly or indirectly hold more than 5 % of the capital or of the voting rights in any entity which provides the services listed in paragraph 3.deleted

2012/10/29
Committee: ECON

Proposal for a regulation
Article 10 – paragraph 6

~~6. The Commission shall be empowered to adopt~~ delegated acts in accordance with Article 68 for the purpose of adapting the list of related financial audit services referred to in paragraph 2 and the list of non-audit services referred to in paragraph 3 of this Article. When using such powers, the Commission shall take into account developments in auditing and the audit profession.

2012/10/29
Committee: ECON

Proposal for a regulation
Article 11 – paragraph 4 – subparagraph 1 – point c

(c) request permission from the audit committee to provide ~~the~~any non-audit services ~~referred to in Article 10(3)(b)(i) and (ii)~~ to the audited entity;

2012/10/29
Committee: ECON

Proposal for a regulation
Article 11 – paragraph 4 – subparagraph 1 – point d

~~(d) request permission from the competent authority referred to in Article 35(1) to provide the non-audit services referred to in Article 10(3)(b)(iii) and (iv) to the audited entity;~~deleted

2012/10/29
Committee: ECON

Proposal for a regulation
Article 22 – paragraph 2 – point r

(r) indicate the non-audit services referred to in Article 10~~(3)(b)(i) and (ii)~~ that the audit committee allowed the statutory auditor or the audit firm to provide to the audited entity;

2012/10/29
Committee: ECON

Proposal for a regulation
Article 22 – paragraph 2 – point s

(s) indicate the non-audit services referred to in Article 10(3)(b)(iii) and (iv) that the competent authority referred to in Article 35(1) allowed the statutory auditor or the audit firm to provide to the audited entity;deleted

2012/10/29
Committee: ECON

Proposal for a regulation
Article 25 – paragraph 1 – subparagraph 1 – introductory part

Without prejudice to Article 55 of Directive 2004/39/EC, Article 53 of Directive 2006/48/EC of the European Parliament and of the Council34 , Article 15(4) of Directive 2007/64/EC, Article 106 of Directive 2009/65/EC, the first paragraph of Article 3 of Directive 2009/110/EC and Article 72 of Directive 2009/138/EC of the European Parliament and of the Council35 , tThe statutory auditor or audit firm carrying out the statutory audit of a public-interest entity shall ~~have a duty to~~ report promptly to the ~~competent authorities supervising public-interest entities~~audit committee, the administrative and supervisory body any fact or decision concerning that public-interest entity of which he, she or it has become aware while carrying out that statutory audit ~~and which is liable~~. The reporting is to bring about any of the following:

2012/10/29
Committee: ECON

Proposal for a regulation
Article 25 – paragraph 1 – subparagraph 1 – point c

(c) a refusal to ~~certify the financial statements or the expression of reservat~~issue an audit report or the issuance of an adverse or a qualified audit opinions.

2012/10/29
Committee: ECON

Proposal for a regulation
Article 25 – paragraph 1 – subparagraph 2

The statutory auditor or the audit firm shall also have a duty to report any facts and decisions according to paragraph 1 (a), (b) or (c) of which he, she or it becomes aware in the course of carrying out ~~the~~a statutory audit of an undertaking ~~having close links with~~controlled by the public-interest entity for which he, she or it is also carrying out the statutory audit. The audit committee, administrative and supervisory body will undertake appropriate steps to immediately inform the competent authorities supervising public interest entities about these reported facts and decisions.

2012/10/29
Committee: ECON

Proposal for a regulation
Article 25 – paragraph 2 – subparagraph 1

Competent authorities supervising ~~credit institutions and insurance undertakings~~financial companies within the definition of public-interest entities in Directive 2006/43/EC shall establish a regular a dialogue with the statutory auditors and audit firms carrying out the statutory audit of those institutions and undertakings.

2012/10/29
Committee: ECON

Proposal for a regulation
Article 25 – paragraph 2 – subparagraph 2

In order to facilitate the exercise of the tasks referred to in the first subparagraph, EBA and EIOPA shall issue guidelines addressed to the competent authorities supervising credit institutions and insurance undertakings, in accordance with Article 16 of Regulation (EU) No 1093/2010 and of Regulation (EU) No 1094/2010, respectively.deleted

2012/10/29
Committee: ECON

Proposal for a regulation
Article 25 – paragraph 3

3. The disclosure in good faith to the competent authorities, by the statutory auditor or audit firm, of any fact or decision referred to in paragraph 1 or of any fact during the dialogue foreseen in paragraph 2 shall not constitute a breach of any contractual or legal restriction on disclosure of information and shall not involve such persons in liability of any kind.deleted

2012/10/29
Committee: ECON

Proposal for a regulation
Article 26 – paragraph 2 – subparagraph 1

The annual financial report and the annual income statement shall show the total turnover divided into fees from the statutory audit of annual and consolidated financial statements of public-interest entities and entities belonging to a group of undertakings whose parent undertaking is a public-interest entity, fees from the statutory audit of annual and consolidated financial statements of other entities and fees charged for audit-related ~~financial~~and other assurance audit services as defined in Article 10~~(2)~~.

2012/10/29
Committee: ECON

Proposal for a regulation
Article 27 – paragraph 1 – subparagraph 3

Statutory auditors and audit firms shall communicate to ~~ESMA and to~~ the competent authorities and to ESMA, EGAOB and if necessary to EBA and EIOPA, that the transparency report has been published on the website of the statutory auditor or audit firm or, as appropriate, that it has been updated.

2012/10/29
Committee: ECON

Proposal for a regulation
Article 31 – paragraph 1 – subparagraph 1

Each public-interest entity shall have an audit committee. The audit committee shall be composed of non-executive members of the administrative body and/or members of the supervisory body of the audited entity ~~and/or members appointed by the general meeting of shareholders of the audited entity~~ or, for entities without shareholders, by an equivalent body.

2012/10/29
Committee: ECON

Proposal for a regulation
Article 31 – paragraph 1 – subparagraph 2

At least one member of the audit committee shall have competence in ~~auditing and another member in accounting and/or~~ auditing. The committee members as a whole shall have competence relevant to the sector in which the audited entity is operating.

2012/10/29
Committee: ECON

Proposal for a regulation
Article 31 – paragraph 1 – subparagraph 3 a (new)

(3a) Members of the audit committee shall take part in skill enhancement programmes in order to ensure an adequate technical knowledge level to fulfil their tasks.

2012/10/29
Committee: ECON

Proposal for a regulation
Article 31 – paragraph 3

3. By derogation from paragraph 1, the following public-interest entities may decide not to have an audit committee: (a) any public-interest entity which is a subsidiary undertaking within the meaning of Article 1 of Directive 83/349/EEC if the entity complies with the requirements in paragraphs 1 to 4 of that Article at group level; (b) any public-interest entity which is an undertaking for collective investment in transferable securities (UCITS) as defined in Article 1(2) of Directive 2009/65/EC or an alternative investment fund (AIF) as defined in Article 4(1)(a) of Directive 2011/61/EU; (c) any public-interest entity the sole business of which is to act as issuer of asset backed securities as defined in Article 2(5) of Commission Regulation (EC) No 809/200437 ; (d) any credit institution within the meaning of Article 1(1) of Directive 2006/48/EC whose shares are not admitted to trading on a regulated market of any Member State within the meaning of point 14 of Article 4(1) of Directive 2004/39/EC and which has, in a continuous or repeated manner, issued only debt securities admitted to trading in a regulated market, provided that the total nominal amount of all such debt securities remains below EUR 100 000 000 and that it has not published a prospectus under Directive 2003/71/EC. The public-interest entities referred to in points (b) and (c) shall explain to the public the reasons for which it considers it not appropriate to have either an audit committee or an administrative or supervisory body entrusted to carry out the functions of an audit committee.deleted

2012/10/29
Committee: ECON

Proposal for a regulation
Article 31 – paragraph 5 – point c

~~(c) monitor the statutory audit of the annual and consolidated financial statements and supervise the completeness and integrity of the draft audit reports in accordance with Articles 22 to 23;~~deleted

2012/10/29
Committee: ECON

Proposal for a regulation
Article 31 – paragraph 5 – point e

(e) be responsible for the procedure on the selection of statutory auditor(s) or audit firm(s) and recommend the statutory auditor(s) or audit firm(s) to be appointed by the audited companies Annual General Meeting in accordance with Articles 32;

2012/10/29
Committee: ECON

Proposal for a regulation
Article 32 – paragraph 2 – subparagraph 3

When it concerns the renewal of an audit engagement in accordance with the second subparagraph of Article 33(1), the audit committee shall~~, for the preparation of its recommendation, take into consideration any findings and conclusions~~ base its recommendation on a comprehensive assessment of the audit quality onf the ~~recommended~~ statutory auditor or audit firm ~~referred to in Article 40(6) and published by the competent authority pursuant to Article 44(d)~~after a period of three consecutive years. The competent authority referred to in Article 35 may adjust the timing in accordance with the national appointment period.

2012/10/29
Committee: ECON

Proposal for a regulation
Article 32 – paragraph 2 – subparagraph 4

The comprehensive assessment shall be performed in a transparent and systematic approach, and shall include the consideration of professional competencies of the auditor or audit firm which are necessary to perform the statutory audit in compliance with relevant ethical requirements and international standards on auditing referred to in Article 20. It shall take into consideration any findings and conclusions on the recommended statutory auditor or audit firm referred to in Article 40(6) and published by the competent authority pursuant to Article 44(d). In its recommendation, the audit committee shall state that its recommendation is free from influence by a third party and that no contractual clause as referred to in paragraph 7 has been imposed upon it.

2012/10/29
Committee: ECON

Proposal for a regulation
Article 32 – paragraph 3 – subparagraph 1 – point f

(f) the audited entity shall evaluate the proposals made by the statutory auditors or audit firms in accordance with the selection criteria predefined in the tender documents. The audited entity shall prepare a report on the conclusions of the selection procedure, which shall be validated by the audit committee. The audit committee shall perform a comprehensive assessment of the proposals made by the statutory auditors or audit firms in a transparent and systematic approach that shall include the consideration of professional competencies of the auditor or audit firm which are necessary to perform the statutory audit in compliance with relevant ethical requirements and international standards on auditing referred to in Article 20. The competent authority shall issue guidelines on the criteria of professional competencies. The audited entity and the audit committee shall take into consideration any inspection report on the applicant statutory auditor or audit firm referred to in Article 40(6) and published by the competent authority pursuant to Article 44(d);

2012/10/29
Committee: ECON

Proposal for a regulation
Article 32 – paragraph 5 – subparagraph 2

If the proposal of the administrative or supervisory board departs from the recommendation of the audit committee, the proposal shall justify the reasons for not following the recommendation of the audit committee. It shall equally justify the reasons if, following a tender procedure referred to in paragraph 3, the renewal of an audit engagement is proposed.

2012/10/29
Committee: ECON

Proposal for a regulation
Article 32 – paragraph 6 – subparagraph 1

~~In the case of a credit institution or insurance undertaking, t~~The administrative or supervisory board shall submit its draft proposal to the competent authority referred to in Article 35(2)~~. The competent authority referred to in Article 35(2) shall have the right to veto the choice proposed in the recommendation. Any such opposition shall be duly justified~~ prior to the selection of the statutory auditor or audit firm by the relevant body or organ. The draft proposal to the competent authority referred to in Article 35(2) shall be accompanied by the results of the comprehensive assessment referred to in Article 32 (2) and (3).

2012/10/29
Committee: ECON

Proposal for a regulation
Article 32 – paragraph 6 – subparagraph 2

The absence of a reply by the competent authority within the prescribed time-limit following submission of the audit committee's recommendation shall be considered as constituting an implied consent to the recommendation.deleted

2012/10/29
Committee: ECON

Proposal for a regulation
Article 33 – paragraph 1 – subparagraph 1

The public-interest entity shall appoint a statutory auditor or audit firm for an initial engagement that shall not be shorter than twohree years.

2012/10/29
Committee: ECON

Proposal for a regulation
Article 33 – paragraph 1 – subparagraph 2

~~The public-interest entity may renew this engagement only once.~~deleted

2012/10/29
Committee: ECON

Proposal for a regulation
Article 33 – paragraph 1 – subparagraph 3

The maximum duration of ~~the combined two engagements~~an audit engagement of a public-interest entity which is a financial company shall not exceed 614 years.

2012/10/29
Committee: ECON

Proposal for a regulation
Article 33 – paragraph 1 – subparagraph 4

Where throughout a continuous engagement of 6 years two statutory auditors or audit firms have been appointed, the maximum duration of the engagement of each statutory auditor or audit firm shall not exceed 9 years.deleted

2012/10/29
Committee: ECON

Proposal for a regulation
Article 33 – paragraph 4 – subparagraph 2

The statutory auditor or audit firm shall establish an appropriate gradual rotation mechanism with regard to the most senior personnel involved in the statutory audit, including at least the persons who are registered as statutory auditors. The gradual rotation mechanism shall be undertaken in phases on the basis of individuals rather than of a complete team. It shall be proportionate in view of the scale and the dimension of the activity of the statutory auditor or audit firm.deleted

2012/10/29
Committee: ECON

Proposal for a regulation
Article 33 – paragraph 4 – subparagraph 3

The statutory auditor or audit firm shall be able to demonstrate to the competent authority that such mechanism is effectively applied and adapted to the scale and the dimension of the activity of the statutory auditor or audit firm.deleted

2012/10/29
Committee: ECON

Proposal for a regulation
Article 33 – paragraph 5 – subparagraph 1

Where a statutory auditor or audit firm is replaced by another statutory auditor or audit firm, the former statutory auditor or audit firm shall provide the incoming statutory auditor or audit firm with a handover file. Such file shall include relevant information concerning the audited entity as may reasonably be necessary to understand the nature of the business and the internal organisation of the audited entity and to ensure the continuity of the statutory audit and the comparability with the audits carried out in previous yearscomply with the requirements contained in Article 23(3) of Directive 2006/43/EC.

2012/10/29
Committee: ECON

Proposal for a regulation
Article 33 – paragraph 5 – subparagraph 2

The former statutory auditor or audit firm shall also grant access to the incoming statutory auditors or audit firms to the additional reports to the audit committee referred to in Article 23 ofor the previous three years and to any information transmitted to competent authorities pursuant to Articles 25 and 27.

2012/10/29
Committee: ECON

Proposal for a regulation
Article 35 – paragraph 2

2. By derogation from paragraph 1, Member States may decide that the responsibility for ensuring that all or part of the provisions of Title III of this Regulation are applied shall be entrusted to, as appropriate, the competent authorities referred to in: (a) Article 24(1) of Directive 2004/109/EC; (b) Article 24(4)(h) of Directive 2004/109/EC; (c) Article 40 of Directive 2006/48/EC; (d) Article 30 of Directive 2009/138/EC; (e) Article 20 of Directive 2007/64/EC; (f) Article 3(1) of Directive 2009/110/EC; (g) Article 48 of Directive 2004/39/EC; (h) Article 97 of Directive 2009/110/EC; (h) Article 44 of Directive 2011/61/EU.deleted

2012/10/29
Committee: ECON

Proposal for a regulation
Article 38 – paragraph 6 a (new)

(6a) A competent authority may, on the basis of clear evidence, add to the list of prohibited non-audit services for statutory auditors and audit firms where it concludes that the provision of such services represents a threat to auditor independence.

2012/10/29
Committee: ECON

Proposal for a regulation
Article 42

Article 42 Market monitoring 1. The competent authorities referred to in Article 35(1) shall regularly monitor the developments in the market for providing statutory audit services to public-interest entities. The competent authorities shall in particular assess the following: (a) the risks arising from high concentration, including the demise of audit firms with significant market share, the disruption in the provision of statutory audit services whether in a specific sector or across sectors, the further accumulation of risk in the market and the impact on the overall stability of the financial sector; (b) the need to adopt measures to mitigate those risks. 2. By X X 20XX [2 years after the entry into force of the Regulation], and at least on a two-year basis thereafter, each competent authority shall draw up a report on this issue and submit it to ESMA, EBA and EIOPA. ESMA, EBA and EIOPA shall use those reports to draw up a joint report on the situation at Union level. The report shall be submitted to the Commission, the European Central Bank and the European Systemic Risk Board.deleted

2012/10/29
Committee: ECON

Proposal for a regulation
Article 42 – paragraph 2 – subparagraph 2

ESMA, EBA and EIOPA shall use those reports to draw up a joint report on the situation at Union level. The report shall be submitted to the ~~Commission~~Member States and their parliaments, European Parliament, the European Central Bank and the European Systemic Risk Board.

2012/10/29
Committee: ECON

Proposal for a regulation
Article 43

~~[...]~~deleted

2012/10/29
Committee: ECON

Proposal for a regulation
Article 46 – paragraph 1 – subparagraph 3 a (new)

(3a) ESMA shall cooperate with the international bodies involved in the developing of the international standards and practices related to the carrying out of statutory audits.

2012/10/29
Committee: ECON

Proposal for a regulation
Article 52

Article 52 Cooperation with regard to contingency planning Where the audit firms concerned by the requirement in Article 43 belong to networks of at least Union dimension, competent authorities shall cooperate within ESMA with a view to ensuring that the different national requirements take account of the network dimension. The competent authorities shall make available to ESMA and the other competent authorities the contingency plans received pursuant to Article 43(4). ESMA shall not formally approve or endorse the contingency plans, but may provide an opinion on them.deleted

2012/10/29
Committee: ECON

Proposal for a regulation
Article 61 – paragraph 3

3. This Article ~~and Articles 62 to 66 are~~is without prejudice to provisions of national criminal law.

2012/10/29
Committee: ECON

Proposal for a regulation
Article 62

~~[...]~~deleted

2012/10/29
Committee: ECON

Proposal for a regulation
Article 63

Article 63 Effective application of sanctions 1. When determining the type of administrative sanctions and measures, competent authorities shall take into account all relevant circumstances, including: (a) the gravity and the duration of the violation; (b) the degree of responsibility of the responsible person; (c) the financial strength of the responsible person, as indicated by the total turnover of the responsible undertaking or the annual income of the responsible natural person; (d) the importance of the profits gained or losses avoided by the responsible person, insofar as they can be determined; (e) the level of cooperation of the responsible person with the competent authority, without prejudice to the need to ensure disgorgements of profits gained or losses avoided by that person; (f) previous violations by the responsible person. Additional factors may be taken into account by competent authorities, if such factors are specified in national law. 2. EBA, EIOPA and ESMA shall jointly issue guidelines addressed to competent authorities in accordance with Article 16 of Regulation No (EU) 1093/2010, Regulation No (EU) 1094/2010 and Regulation No (EU) 1095/2010 on types of administrative measures and sanctions and level of administrative pecuniary sanctions to be applied in individual cases within the national legal framework.deleted

2012/10/29
Committee: ECON

Proposal for a regulation
Article 64 – paragraph 1

Every administrative measure or sanction imposed for breach of this Regulation shall be published without undue delay, including at least information on the type and nature of the breach ~~and the identity of the persons responsible for it~~, unless such publication would seriously jeopardise the stability of financial markets. Where publication would cause disproportionate damage to the parties involved, competent authorities shall publish the measures and sanctions on an anonymous basis.

2012/10/29
Committee: ECON

Proposal for a regulation
Article 64 – paragraph 2

~~Competent authorities shall inform ESMA, without undue delay, of any sanction or measure adopted for breach of this Regulation.~~deleted

2012/10/29
Committee: ECON

Proposal for a regulation
Article 67 – paragraph 1

1. Competent and judicial authorities shall provide ESMA annually with aggregated information regarding all administrative measures, sanctions and fines imposed in accordance with Articles ~~61, 62,~~ 63, 64, 65 and 66. ESMA shall publish this information in an annual report.

2012/10/29
Committee: ECON

Proposal for a regulation
Article 67 – paragraph 2

~~2. Where the competent authority has disclosed administrative measures, sanctions and fines to the public, it shall simultaneously report that fact to ESMA.~~deleted

2012/10/29
Committee: ECON

Proposal for a regulation
Article 69 a (new)

Article 69a Report about ESMA The Commission shall by X X ( five years after the end of the transitional period) prepare a report on ESMA’s current and future role. The Commission shall assess whether ESMA has enough resources to fulfil its tasks according to this Regulation.

2012/10/29
Committee: ECON

Proposal for a regulation
Article 69 – paragraph 1

By X X 20XX [five years after the end of the transitional period] the Commission shall prepare a report on the application of this ~~Regulation~~Directive. The report shall take due account of the report prepared by ESMA referred to in the fourth subparagraph of Article 46(4).

2012/10/29
Committee: ECON

Proposal for a regulation
Article 70 – paragraph 1 – subparagraph 1 – introductory part

By derogation from Articles 32and 33, the following requirements shall apply to contracts for the provision of statutory audit to public-interest entities which are in force at [date of entry into force of this ~~Regulation~~Directive]:

2012/10/29
Committee: ECON

Proposal for a regulation
Article 70 – paragraph 1 – subparagraph 1 – point a

(a) any audit contract entered into before XX/XX/XXXX [the date of adoption of the Commission proposal] which is still in force on [the date of entry into force of this ~~Regulation~~Directive] shall remain applicable for a maximum period of four accounting years after [the date of entry into force of this ~~Regulation~~Directive];

2012/10/29
Committee: ECON

Proposal for a regulation
Article 70 – paragraph 1 – subparagraph 1 – point b

(b) any audit contract entered into after XX/XX/XXX [the adoption of the Commission proposal] but before XX/XX/XXXX [the date of entry into force of this ~~Regulation~~Directive] and which is still in force shall remain applicable for a maximum period of five accounting years after XX/XX/XXXX [the date of entry into force of this ~~Regulation~~Directive];

2012/10/29
Committee: ECON

Proposal for a regulation
Article 70 – paragraph 1 – subparagraph 1 – point c – point vi – paragraph 1

By derogation from the criteria set out in point (c), the audit contract may remain applicable until the end of the first accounting year ending after [2 years after the entry into force of this ~~Regulation~~Directive].

2012/10/29
Committee: ECON

Proposal for a regulation
Article 70 – paragraph 2 – subparagraph 1

Article 33 shall apply to any audit contract entered into after […] [the date of the entry into force of this Regulation] but before […] [[2 years after the entry into force of this ~~Regulation~~Directive].

2012/10/29
Committee: ECON

Proposal for a regulation
Article 71 – paragraph 1

The Member States shall make such provision as is appropriate to ensure the effective application of this ~~Regulation~~Directive.

2012/10/29
Committee: ECON

Proposal for a regulation
Article 72 – paragraph 1

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

2012/10/29
Committee: ECON

Proposal for a regulation
Article 72 – paragraph 3

However, Article 32(7) shall apply from […] [the date of the entry into force of the ~~Regulation~~Directive] and Article 10(5) shall apply from […] [3 years after the entry into force of the ~~Regulation~~Directive].

2012/10/29
Committee: ECON