Consultation on the Adopting of International Standards on Auditing

General remarks

The Central Chamber of Commerce of Finland is herewith submitting its statement as follows on the consultation on the adopting of International Standards on Auditing (ISAs) issued in June 2009 by the Commission of the European Communities.

In the opinion of the Central Chamber of Commerce ISAs have a paramount role in improving and harmonising the audit quality. Use of ISAs enhances the functionality of audit market and therefore improves the quality of audit and helps to develop the audit industry as a whole.

We welcome the work, which the International Assurance and Auditing Standards Board (IAASB) has recently performed through a revision and clarification of the ISAs under the so-called Clarity Project.

The Central Chamber of Commerce supports the adoption of these clarified ISAs throughout the EU. We urge the Directorate General Internal Market and Services to move on into the adoption process soon. ISA adoption at EU level complies with public interest. ISA adoption would bring significant benefits to the business community as a whole.

Questions:

(1) Is international acceptance of the ISAs sufficiently demonstrated?

(2) What degree of importance do you attach to the fact that the Commission may amend the standards?

(3) To what extent are “add-ons” or “carve outs” by Member States acceptable?

The ISAs form the most advanced set of auditing standards globally. International acceptance of the ISAs in sufficiently demonstrated in the Commission´s communication.

The Central Chamber of Commerce strongly supports the Commission´s efforts to influence and contribute to the work of the IAASB. We find that uniform acceptance and application of the ISAs globally is most vital in order to fully benefit from their international character.

The Central Chamber of Commerce does not support any EU amendment into the standards because this would risk the consistent application of the ISAs. Therefore we do not either support carve-outs to be allowed after endorsement of ISAs. However, the ISAs should not prevent Member States from issuing requirements on statutory audit which do not conflict or overlap with the ISAs as such.

Questions:

(4) Do you have any comments on the overall cost/benefit analysis presented in the University of Duisburg/Essen study?

(5) Should the Application Material be part of the adoption process and acknowledged as 'best practice'?

(6) Should ISQC1 on internal quality controls be part of the adoption process?

(7) In case of adoption of the ISAs at EU level, would a common reference to “ISAs as adopted in the EU” in all auditors' reports in the EU be sufficient? Or, is further harmonisation of audit reports necessary?

The analysis presented by the University of Duisburg/Essen seems carefully done and well reasoned.

The Central Chamber of Commerce believes that the adoption of ISAs in the EU would result in quantitative and qualitative benefits for companies, investors and regulators. However, the current situation in Member States varies significantly. In Finland statutory audit is at the moment obligatory also to a large amount of micro entities. The ISAs are already followed in practice more strictly in audit engagements of middle-size and large companies compared with the audits in small companies. Audit fees for small companies in Finland are low and therefore the application of ISAs would cause a greater proportional increase in audit costs of small companies.

The Central Chamber of Commerce agrees with the IAASB and the Commission that the application material is an inherent part of the standards. We can see disadvantages and costs related to the inclusion of the Application and Other Explanatory Material as part of an EU adoption process but we find the advantages more significant. The application material should be adopted as guidance only.

ISQC 1 and ISA 220 have a significant role in the way how audit firms organise their internal quality controls. To create an alternative standard would be too burdensome to most regulators. The Central Chamber of Commerce supports the adoption of the ISQC 1 standard together with the ISAs. We agree with the conclusion of the University of Duisburg-Essen study that the introduction of ISQC 1 would increase the benefits of an ISA adoption at EU level.

In the opinion of the Central Chamber of Commerce the ISAs should apply to all statutory audits performed in the EU and that should be clearly stated in all auditors’ reports.

We find that a common reference to “ISAs as adopted in the EU” in all auditors’ report would be sufficient.

It is vitally important that especially the audit reports of internationally operating companies and listed companies are uniform throughout Europe because it facilitates their understanding by investors and other stakeholders. Thus uniformity improves the functioning of financial markets.

Questions:

(8) Do you support adoption of ISAs at EU level?

(9) If yes, which of the following options do you support: Option 1 – ISAs should be adopted for the audit of the consolidated accounts of the listed companies (IFRS accounts); Option 2 – ISAs should be adopted for the statutory audit of all companies except for the audits of small companies where Member States would be free to choose which audit standards should be applied; Option 3 – ISAs should be adopted for the statutory audit of all companies, including small companies for which an audit is required.

(10) Do you have comments on the timing in case of an adoption of the ISAs?

The Central Chamber of Commerce supports the adoption of ISAs at EU level.

The Central Chamber of Commerce supports option 3. We think that all audits should follow same professional standards (“an audit is an audit”). We agree also with the view that the ISAs allow and should allow audit work and audit documentation to be proportionate to the size of the audited entity. Member States have also the option to exempt the small companies from statutory audit requirement.

We think that the adoption of ISAs should be done as soon as possible.

• Lausunnon saaja: European Comission
• Lausunnon päivä: 15.9.2009
• Kirjoittaja: Kari Vainio
• Titteli: Quality Assurance Director

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