European Audit Committee Leadership Network, May 2016
On 7–8 April 2016, members of the European Audit Committee Leadership Network (EACLN) met in London for their 25th stand-alone meeting. One session was a dialogue with audit regulators and policymakers in the European Union (EU), including the following:
Alain Deckers, head of the Audit and Credit Rating Agencies unit of the Directorate-General for Financial Stability, Financial Services and Capital Markets Union at the European Commission
Paul George, executive director of the UK Financial Reporting Council (FRC)
Tim Volkmann, secretary general of the German Auditor Oversight Commission (AOC)
In conversations before, during and after the meeting, guests and members touched on various aspects of the following topics:
Implementing the EU audit legislation
EACLN members and guests discussed the challenges of implementing the EU audit legislation of 2014, including mandatory rotation, which is particularly difficult because national variations in engagement periods may force companies to bring in a different auditor. At the same time, members as well as guests acknowledged that tendering the audit is yielding fresh perspectives and innovation, even if the incumbent firm retains the audit. Regarding the requirement in Article 27 that audit regulators report on audit committee performance, Mr Deckers dispelled fears of excessive scrutiny and intervention by noting that the initial focus is simply to understand how audit committees work.
Evaluating audit committee performance
Audit chairs discussed some of the approaches they themselves have taken in trying to measure and improve their performance. They described their processes for self-evaluation and their efforts to reach out to the external auditor for feedback on how they compare, as clients, to other companies. They also mentioned using outside consultants, who can also provide insights gleaned from their interactions with multiple companies and audit committees. In pre-meeting conversations, members and guests touched on several high-level practices of well-performing audit committees.
Cooperation between audit committees and audit regulators and policy-makers
The guests and EACLN members agreed that cooperation is fruitful given the convergence of interests among them. They discussed how audit regulators can share the results of their audit firm inspections with audit committees, describing some of the challenges and early successes in this area. While regulation of audit committees should be minimal, the participants suggested, audit regulators can provide guidance on best practices, as the FRC has already done. Both the guests and audit chairs look forward to continuing their dialogue.