On June 6 2016 the Luxembourg financial sector regulator (CSSF) published frequently asked questions (FAQs) dated June 3 2016 clarifying the criteria that it considers when assessing whether to accept an external expert as a regulated entity's internal auditor.
The FAQs comprise five questions, the first and most extensive of which covers the five conditions that an external expert must meet to be accepted as an internal auditor. Namely, the external expert must:
- be independent of both the entity's external auditor and the group that the latter belongs to;
- have sufficient human and material resources that are adapted to the complexity of the entity's activity;
- have sufficient technical knowledge of the entity's activities and risks, as well as knowledge of applicable regulations (this condition will generally be satisfied if the proposed external expert is a certified auditor that regularly audits regulated entities similar to the one making the request);
- have sufficient applied knowledge of the Institute of Internal Auditors standards or equivalent international regulations; and
- demonstrate that its work is of a satisfactory quality and that it has an appropriate level of professional integrity.
The CSSF has also confirmed that the criteria are assessed proportionately (ie, taking into account the nature, scale and complexity of the entity's activities and the associated risks). Further, the CSSF may decide whether – in light of the requesting entity's size and risk profile – outsourcing the internal audit is actually possible. In such cases, the CSSF may request further information from the proposed external expert or interview the relevant parties.
For further information on this topic please contact Josée Weydert or Joanna Bolanowska at NautaDutilh Avocats Luxembourg Sàrl by telephone (+352 26 12 29 1) or email (firstname.lastname@example.org or email@example.com). The NautaDutilh Avocats Luxembourg Sàrl website can be accessed at www.nautadutilh.com.
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