On 31 December 2016, the audit reform will enter the Belgian legal landscape. The reform involves both a compliance with best practice and strong requirements regarding independence of the audit profession. It also contains specific stricter measures for public interest entities (PIE) (1).
Two important aspects of the reform are briefly discussed below.
First aspect: the supervision of registered auditors
Supervision of registered auditors will no longer be carried out by the Institute of Registered Auditors (Institut des réviseurs d’entreprises). From now on, registered auditors will be subject to public supervision. To this end, a new body, called the Supervisory Board of Registered Auditors (Collège de supervision des réviseurs d’entreprises), has been established. This board will subject all registered auditors to a quality control: this control will be carried out every 3 years for auditors of PIEs and every 6 years for other auditors.
Second aspect: the independence of statutory auditors
Various measures have been introduced or strengthened with regard to the independence of statutory auditors.
(a) Rotation obligation
9-year external rotation
As of 16 July 2016, the statutory auditor of a PIE may not serve more than 3 consecutive terms of 3 years with the same entity, covering a maximum duration of 9 years. Transitional measures have been stipulated.
For statutory auditors not on assignment with a PIE, nothing changes: no maximum duration is provided.
A PIE may, nonetheless, renew the mandate of its statutory auditor beyond the 9-year limit. Under certain conditions, 3 additional terms may be granted for a total duration of 18 years, if the PIE organizes a public call for tenders. The granting of additional terms can even go up to 5, for a total duration of 24 years, if the mandate is exercised by a board of statutory auditors.
6-year internal rotation
The permanent representative of an audit firm which has a mandate as statutory auditor of a PIE must be replaced within 6 years of her or his appointment. This rule is also applicable to mandates as statutory auditor of a subsidiary of a PIE that draws up consolidated accounts.
(b) An extended black list
This list contains activities that statutory auditors and the members of their network cannot carry out in a controlled company because such activities may threaten their independence. This list is extended for PIEs and includes various tax services, general legal advice and payroll services.
(c) From the one to one rule to the 70% rule
Under the one to one rule, the statutory auditor of a company that is part of a group that draws up consolidated accounts can provide non-audit services, as long as the fees invoiced for those services do not exceed the remuneration received for one’s mandate as statutory auditor.
For the statutory auditor of a PIE, this ratio is now reduced to 70%.
There is, however, a loosening of this rule, whether or not it concerns a PIE: the non-audit services in question only relate to those provided by the statutory auditor itself and not to those provided by its network.
(1) This concept now covers:
- companies listed on a regulated market;
- credit institutions;
- insurance and reinsurance undertakings;
- settlement organisations and bodies assimilated to settlement organisations.