QAU Host EAIG Plenary Meeting In Malta
Recently the Quality Assurance Unit (QAU) hosted the 16th plenary meeting of the European Audit Inspection Group (EAIG). 57 delegates representing audit regulators from 29 European jurisdictions within the EU and the EEA came to Malta for this event. The plenary meeting was spread on two days and was held at the Palace Hotel, in Sliema.
The QAU and the EAIG
The QAU plays an active role within the European Audit Inspection Group (EAIG), whose primary purpose is to create an awareness of important issues and promote cooperation and consistency amongst European audit regulators on Quality Assurance inspections.
The Quality Assurance Unit was set up in June 2006. It upholds the safeguarding of the public interest as its prized goal, a goal which is shared by other audit regulators and investors groups alike. First inspections were carried out in February 2007. The Unit has to date carried out 320 inspection visits to audit practices in Malta.
The EAIG today, shares inspection practices and findings amongst its members and facilitates discussions on topics related to audit inspections with standards setters. The main scope of this dialogue is that of promoting audit quality. The EAIG also has ongoing discussions with four of the largest audit networks in Europe. It has set up specific work groups for each of these networks at which meetings, findings emanating from inspections carried out across Europe are discussed. More importantly, however, the work of these sub groups is discussed at EAIG plenary meetings. Top officials of the respective international network firms are invited to attend separately plenary meetings set for this purpose. These meetings with the larger networks focus on a root cause analysis of the findings noted during inspections and the remedial action to be taken by the respective network firms to address the findings noted.
Insights with Standard Setters
The agenda of the plenary meeting included a mix of informative discussions amongst delegates representing audit regulators in other EU members’ states and presentations by the standard setters.
The meeting was addressed by Professor Edward Scicluna, Minister of Finance, and was chaired by the German Auditor Oversight Commission (AOC). Professor Scicluna emphasised the importance of the role statutory auditor’s play in the economic framework of one’s country and how public oversight has gained recognition across the globe.
Representatives from the International Auditing and Assurance Standards Board (IAASB) and the International Ethics Standards Board for Accountants (IESBA) joined the meeting on the first day and updated the EAIG on their current work streams and on how comments raised by regulators have been taken into account in their processes.
The IAASB presented its goals on particular initiatives put forward by audit regulators to comment. Issues in the context of priority topics included quality control, group audits, professional scepticism, and fair values. The IAASB also expressed interest to give a broad view on issues and possible actions to solicit written feedback and stimulate outreach discussions by both standard setters and audit regulators, with investors, audit committees and preparers of financial statements. Despite its noble objectives, Professor Arnold Schindler, IAASB Chairman identified public interest areas that put pressure on the IAASB to focus more closely on, in the coming years. Amongst other things IAASB wants to enhance audit leadership, and encourage more transparency in financial reporting.
Richard Fleck of the ethics standard setter, IESBA discussed the effects on the analysis for responses to changes on the structure of the code regarding independence. There is some diversity on the views proposed by IESBA on insights currently discussed with respect to Non Assurance Services, Long Association with personnel including rotation of key audit partners on the audit of PIEs. Non Compliance with Laws and Regulations was another subject debated at this meeting.
EAIG Common Audit Inspection Methodology (CAIM)
An important milestone for the EAIG in the past two years was the Common Audit Inspection Methodology (CAIM) project, which project, as its name suggests, seeks to harmonise inspection methodologies amongst all EU member states and EEA countries. The first phase of the project, which is wholly International Standard for Quality Control (ISQC) related, was launched towards the end of last year. This seeks to synchronise ISQC1 methodologies being applied by European audit regulators to assess the propriety of the whole firm quality control procedures adopted by audit firms auditing Public Interest Entities. Phase II of the project pertaining to the quality of audit files was launched at the Malta meeting.
EU audit reforms
The more recent EU Directive and Regulations governing European audit policy will undoubtedly give rise to changes in audit quality methodologies, once these are transposed into our legislation. In the light of the current debate on the EU audit directive legislation the UK and German delegates provided an overview on changes and potential implications for inspections as a result of the EU audit reform.
The event has been an immense achievement for both the QAU and the Ministry of finance. Malta is a founder member of the EAIG and has participated very actively within this audit inspection group since its inception in 2007. The plenary meeting held in our homeland, affirms Malta’s commitment to audit quality and its ongoing cooperation and sharing of information with other European audit regulators. This was confirmed during the closing session of this important event which was certainly a significant milestone for audit regulation in Malta.
Mr Coppini, who still headed the QAU, thanked all delegates for finding the time to attend and participate at the meeting and pledged Malta’s continued support to the EAIG in its role to promote audit quality in the years to come.
Clearly there will be a number of challenges ahead of audit regulation in Europe in the immediate future. These will undoubtedly have an impact on the modus operandi of audit practices, as the EU audit reforms are transposed into the member states’ legislation by June of 2016. Nevertheless, we believe that all stake holders within the field of audit regulation will embrace these changes in a smooth and effective manner.
Any further information, in regard to the role that EAIG plays, and other initiatives it has taken in its primary role of safeguarding audit quality across all EU member states, can be downloaded from the EAIG website www.eaigweb.org.
Similarly more information about the QAU can be accessed from the Accountancy Board website www.accountancyboard.gov.mt. One can also download the 2014 Annual Report which, amongst others includes key observations emanating from inspection visits carried out in 2014 and a root cause analysis of poor audit quality arising from some of the inspections carried out.