Attention Audit Committees! Are You Set For 2017? (Step 6)

Welcome to the final part of our 6-part series of articles about how audit committees ("ACs") can prepare and deal with new legislation. Specifically, the law of 23 July 2016 on the audit profession ("Law") and Regulation (EU) N° 537/2014 ("Regulation") will affect the roles and responsibilities of ACs, as well as their relationships with external auditors.

Step 6 - What should the additional report of the external auditor to the AC include?

In this article, we focus on step 6.

In addition to its expanded audit report, the statutory auditor of a public interest entity ("PIE") is also required to provide a specific written report to the AC. This report is part of the new requirements for statutory auditors of PIEs to give more insights on the audit.

This additional report will provide the AC with more detailed information on the results of the audit, together with explanatory text.

The statutory auditor of a PIE is required to disclose, in particular, 'the quantitative level of materiality applied to perform the statutory audit for the financial statements as a whole and the qualitative factors which were considered when setting the level of materiality'. Also to be included are 'judgements about events or conditions identified in the course of the audit that may cast significant doubt on the entity's ability to continue as a going concern and whether they constitute a material uncertainty'.

New requirements

Although many of the requirements do not constitute a significant departure from current practice, there are some new requirements, some that demand more specificity and some that still require further clarification, including:

a description of the nature, frequency and extent of communication with the AC, including the dates of the...