FEE: Recent developments in auditor communication

23 February 2015

The publication provides an overview of the recent changes to the EU legislative requirements on auditor communication.

This paper was prepared in the context of the publication of the European Directive on Statutory Audits of Annual and Consolidated Accounts and Regulation on Statutory Audit of Public Interest Entities.

The publication compares the recent changes to the EU legislative requirements on auditor communication with the international developments taking place under the remit of the IAASB and highlights those areas where the requirements are equivalent or complementary.

The new European audit legislation comprises updated EU provisions regarding the communication of the auditor in:

Both the EU Directive and the Regulation entered into force on 16 June 2014. Member States have to adopt, publish and apply the measures necessary to comply with the Directive by 17 June 2016. Most provisions of the Regulation shall also apply from 17 June 2016.

A number of ISAs deal with auditor communication. One of the IAASB’s main priorities since 2011 has been to determine whether and how the suite of ISAs should be amended to better accommodate stakeholders’ needs and enhance the communicative value and relevance of the audit report.

ISAs are applicable to all auditors’ reports issued as a result of an audit of financial statements with some specific requirements applicable to listed entities only. These requirements may be extended voluntarily to all audits.

New and revised standards will be applicable for accounting periods ending on or after 15 December 2016. Early adoption is permitted.

The main differences between the EU and IAASB provisions are in respect of the effective date and the scope of some of the proposals that relate to PIEs (for the EU) as compared to listed entities (for the IAASB).

Based on the Directive and Regulation, EU countries should, for all statutory audits, require the use of ISAs adopted by the EC. EU law also empowers the EC to adopt ISAs at a European level, but a timetable for this has not yet been set. In the meantime, the Audit Directive provides that Member States may apply national auditing standards.

Notwithstanding that many EU Member States have voluntarily already adopted the ISAs at a national level, either without modification or with a few national additions, formal adoption by the EC is still desirable for a number of reasons, such as:

Briefing Paper


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