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Statutory audit

The current regulatory framework for statutory audit underpins audit quality and ensures market integrity.

Why and for whom is it important?

The regulatory framework for statutory audit is of critical importance for audit quality, proportionate regulation, and avoiding unnecessary burdens on businesses. It underpins the overall integrity and financial stability of markets, in a situation of extensive market and business interconnections between the UK and the EU27. These include:

  • EU27 entities listed on UK regulated markets from 10 member states (UK entities with EU27 listings are limited but may grow);
  • debt securities on EU regulated markets and multi-lateral trading facilities, particularly important for the UK, Ireland and Luxembourg;
  • pan-EU27-UK entities, including parent-subsidiary undertakings and branches, cross-border joint ventures, mergers and acquisitions; and
  • SMEs operating or selling cross-border between EU27 and UK.

What are our key concerns?

Brexit could lead to a detrimental and burdensome proliferation of legal uncertainties and regulatory overlaps, unless comprehensive arrangements are made to cover the gaps arising when the UK leaves the EU regulatory framework. 

This could have particular consequences for the right to maintain listings on regulated markets, including the requirement in listing rules for legally valid audit reports. These risks currently arise primarily for EU27 entities listed on UK regulated markets. However, there are also important questions for the small number of existing companies with EU27-UK dual listings, as well as for how companies will have access in the future to capital markets across the UK and EU27.

We see two main areas of concern relating to:

  • the functioning of the regulatory framework for statutory audit; and
  • practical issues relating to free movement arrangements between the EU and the UK, especially as they impact group audits.

We believe that a comprehensive EU27-UK agreement that mutually recognises regulatory frameworks for statutory audit would be the most appropriate approach from the perspective of audit quality and to meet the needs of business and investors.

The regulatory framework for statutory audit

As a member of the EU, the UK is currently part of a broad regulatory framework for audit. The framework covers registration requirements and includes provisions relating to quality assurance and inspections, investigations and sanctions, as well as the transfer of audit working papers. At a regulatory level, European cooperation is also pursued through specific mechanisms, including the Committee of European Audit Oversight Bodies (CEAOB). This framework relies on maximised home country regulation, encouraging coordination in relation to the supervision of major cross-border audit assignments.

Detailed arrangements covering each aspect need to be agreed between the UK and EU in order to avoid unnecessary burdens and overlapping regulatory requirements post-Brexit.

Read more about the other key areas

 

 

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Why and for whom is it important?

The regulatory framework for statutory audit is of critical importance for audit quality, proportionate regulation, and avoiding unnecessary burdens on businesses. It underpins the overall integrity and financial stability of markets, in a situation of extensive market and business interconnections between the UK and the EU27. These include:

  • EU27 entities listed on UK regulated markets from 10 member states (UK entities with EU27 listings are limited but may grow);
  • debt securities on EU regulated markets and multi-lateral trading facilities, particularly important for the UK, Ireland and Luxembourg;
  • pan-EU27-UK entities, including parent-subsidiary undertakings and branches, cross-border joint ventures, mergers and acquisitions; and
  • SMEs operating or selling cross-border between EU27 and UK.

What are our key concerns?

Brexit could lead to a detrimental and burdensome proliferation of legal uncertainties and regulatory overlaps, unless comprehensive arrangements are made to cover the gaps arising when the UK leaves the EU regulatory framework. 

This could have particular consequences for the right to maintain listings on regulated markets, including the requirement in listing rules for legally valid audit reports. These risks currently arise primarily for EU27 entities listed on UK regulated markets. However, there are also important questions for the small number of existing companies with EU27-UK dual listings, as well as for how companies will have access in the future to capital markets across the UK and EU27.

We see two main areas of concern relating to:

  • the functioning of the regulatory framework for statutory audit; and
  • practical issues relating to free movement arrangements between the EU and the UK, especially as they impact group audits.

We believe that a comprehensive EU27-UK agreement that mutually recognises regulatory frameworks for statutory audit would be the most appropriate approach from the perspective of audit quality and to meet the needs of business and investors.

The regulatory framework for statutory audit

As a member of the EU, the UK is currently part of a broad regulatory framework for audit. The framework covers registration requirements and includes provisions relating to quality assurance and inspections, investigations and sanctions, as well as the transfer of audit working papers. At a regulatory level, European cooperation is also pursued through specific mechanisms, including the Committee of European Audit Oversight Bodies (CEAOB). This framework relies on maximised home country regulation, encouraging coordination in relation to the supervision of major cross-border audit assignments.

Detailed arrangements covering each aspect need to be agreed between the UK and EU in order to avoid unnecessary burdens and overlapping regulatory requirements post-Brexit.

Read more about the other key areas