The Belgian chamber of representatives voted a new law to fully implement the European Union (EU) audit reform, putting an end to the transposition process. The law is effective on 31 December 2016.
The EU audit reform which is made of a directive and a regulation offered member states 19 options to choose from.
In terms of the main option on the table for national governments to choose from was the cycle of audit firm rotation for PIEs. Belgium decided to go for a rotation of external audit firms every 9 years, which can be extended to 18 years in case of a public tender and 24 years in the case of a joint audit.
Belgium already had seven non-audit services (NAS) which couldn’t be rendered to audit clients prior to the EU reform. These five NAS remain on the prohibit list along with five additional services.
Belgium also modified the structure of the audit report, adopting the inclusion of the key audit matters to highlight risks links to significant anomalies and in particular fraud.
As part of the EU audit reform implementation, Belgium also decided to strenghten its audit regulation, as such a new regulator will be formed to conduct quality control reviews every three years on PIE auditors and every six years on non-PIE auditors.
Thierr Dupont, president of the Belgian institute of auditors (IRE – ’Institut des Réviseurs d’Entreprises), said: “Now that Belgium has adopted whole the european rules in its national law, auditors are convinced that their role as creator of trust in the public interest is strenghten. [IRE] fully support this reform.”
Analysis: A patchwork of national rules – a regulation doomed to fail?
The amount of options available in the EU audit reform for member states to choose from raised some concern amongst industry stakeholders that rather than harmonised the audit regulation in Europe it would create a patchwork of 28 different regulations.
Belgium is the last of a series of countries to finalise the transposition and so far while not hugely different from one country to another, the EU is slowly heading towards the dreaded patchwork.
Accordingly, Denis Lesprit, president of the French Institute of auditors (CNCC – Compagnie National des Commissaires aux Comptes), believes that the reform will come back on the table in the next two or three years.
Met at the French Institute of professional accountants (OEC -Ordre des Experts Comptables), he said: “If you look at the options in the reform, rather than harmonise, it will reveal the differences. The Federation of European Accountants has a map of Europe with different colours for the different options taken; it’s a patchwork! And that’s why we should see the European regulators tackling the question again. More importantly, I’m sure that in practice some case will emerge which will reveal that it’s impossible to function in this framework.”