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Auditing the Auditors - New Legislation Introduces New Rules and Standards
The Minister for Enterprise, Trade and Innovation published the European Communities (Statutory Audits) (Directive 2006/43/EC) Regulations 2010 (SI 220/2010) (the “Regulations”) to give effect to Directive 2006/43/EC on Statutory Audits of Annual Accounts and Consolidated Accounts. The Regulations aim to achieve high-level harmonisation and regulation of audit processes within the EU.
The Regulations provide for an approval process of statutory auditors and audit firms and prohibit unapproved persons from acting as auditors. The Regulations also set out standards and provisions which are applicable to statutory auditors and audit firms and set out requirements with regard to continuing education, professional ethics and independence, objectivity and confidentiality. They provide for the establishment of a public register to contain information on statutory auditors. Detailed provisions are also included with regard to public oversight and quality assurance of statutory auditors and audit firms together with regulatory arrangements between Member States of the European Union and the mutual recognition of these.
The Regulations also permit auditors of companies to incorporate and avail of the benefits of limited liability.
The Regulations, which have been positively received, are a step towards harmonising the rules and processes with regards to auditing in the EU. They provide greater transparency and should lead to an increased confidence in the auditing system.