06/04/2011 15:09
The European Commission has today asked Cyprus to respect EU rules on auditing.
Under these rules, Member States should have set up a public oversight system for statutory auditors and audit firms under national law. As Cyprus has failed to do so, the Commission has sent Cyprus a reasoned opinion, the second step in the infringement procedure. If the Cypriot authorities fail to take satisfactory measures to remedy the infringement of EU law within two months, the Commission may decide to refer the case to the EU Court of Justice.
The Statutory Audit Directive aims to ensure that investors and other interested parties can rely on the accuracy of audited accounts. The Directive sets out the duties of statutory auditors and certain ethical principles to ensure their objectivity and independence, for example where audit firms are also providing their clients with other services. It introduced a requirement for external quality assurance and is to improve co-operation between regulatory authorities in the EU.
Furthermore, in order to ensure high quality and independence, the Directive requires Member States to organise an effective system of public oversight on audit firms and statutory audits. The system is responsible for the approval and registration of statutory auditors, the adoption of standards on professional ethics and for ensuring continuing education and quality assurance. It also has the right to conduct investigations where necessary and to take appropriate actions accordingly, such as penalties and sanctions.
Member States had to implement the Statutory Audit Directive by 29 June 2008. However, Cyprus has so far only partly transposed this Directive into national law. While the law1 adopted does foresee the setting up of a public body responsible for the public oversight of statutory audits and audit firms, this institution has not actually been created yet.
There is to date no guarantee that supervision over audit firms in Cyprus is conducted by an independent body. Therefore, statutory audits performed in Cyprus may be considered less reliable by investors than elsewhere in the European Union.
Under these rules, Member States should have set up a public oversight system for statutory auditors and audit firms under national law. As Cyprus has failed to do so, the Commission has sent Cyprus a reasoned opinion, the second step in the infringement procedure. If the Cypriot authorities fail to take satisfactory measures to remedy the infringement of EU law within two months, the Commission may decide to refer the case to the EU Court of Justice.
The Statutory Audit Directive aims to ensure that investors and other interested parties can rely on the accuracy of audited accounts. The Directive sets out the duties of statutory auditors and certain ethical principles to ensure their objectivity and independence, for example where audit firms are also providing their clients with other services. It introduced a requirement for external quality assurance and is to improve co-operation between regulatory authorities in the EU.
Furthermore, in order to ensure high quality and independence, the Directive requires Member States to organise an effective system of public oversight on audit firms and statutory audits. The system is responsible for the approval and registration of statutory auditors, the adoption of standards on professional ethics and for ensuring continuing education and quality assurance. It also has the right to conduct investigations where necessary and to take appropriate actions accordingly, such as penalties and sanctions.
Member States had to implement the Statutory Audit Directive by 29 June 2008. However, Cyprus has so far only partly transposed this Directive into national law. While the law1 adopted does foresee the setting up of a public body responsible for the public oversight of statutory audits and audit firms, this institution has not actually been created yet.
There is to date no guarantee that supervision over audit firms in Cyprus is conducted by an independent body. Therefore, statutory audits performed in Cyprus may be considered less reliable by investors than elsewhere in the European Union.
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