The Belgian Act of 7 December 2016 regarding the organization and supervision of statutory auditors (the “Act”) transposes into Belgian law the European Directive regarding the control of annual accounts and implements the European Regulation on the statutory audit of public-interest entities (“PIEs”). The law creates a new category of undertakings: PIEs, which include the following undertakings:
- listed companies;
- credit institutions;
- insurance and reinsurance undertakings;
- settlement organizations.
The key aspects of the reform mainly concern PIEs and can be summarized as follows:
- Mandatory statutory auditor (or audit firm) rotation For PIEs, the duration of the mandate of the statutory auditor (or audit firm) is three years (unchanged), but can only be freely renewed twice (i.e. a maximum duration of nine years). After this, the mandate of the statutory auditor can be renewed three more times (+ nine years) or six more times (+ 18 years), provided that a public tender process is organized or that another audit firm is appointed to work together with the existing firm as a “college”, respectively.
- An extended “black list” The black list, i.e. the list of seven “non-audit services” that statutory auditors (of both PIEs and non-PIEs) are not allowed to provide to the company they control, remains. For PIEs, this black list is completed with five additional prohibited “non-audit services”: certain tax services, general legal counsel, payment services, promoting, dealing in or underwriting shares submitted to legal control, and certain services linked to financing. Due diligence services relating to an acquisition are still allowed.
- From the “one to one” rule to the 70% rule The statutory auditor of a company that draws up consolidated accounts can provide non-audit services (which are not on the black list), as long as the fees invoiced for those services do not exceed the remuneration received for the mandate as a statutory auditor. For PIEs that draw up consolidated accounts, the ratio has been reduced to 70%. No limit applies for companies that do not draw up consolidated accounts and that are not PIEs.
- Reform of the audit committee
The following rules now apply to the audit committees of PIEs:
- at least 50% of the audit committee must comprise independent directors;
- at least one member of the audit committee must have accounting and auditing competence;
- the audit committee has new missions such as providing recommendations for the appointment of the company’s statutory auditor, monitoring the audit process and supervising the statutory auditor’s compliance with additional reporting requirements;
- the statutory auditor has new reporting requirements towards the audit committee, such as drawing a special annual report to the audit committee, communicating the annual services provided to the company and examining all the risks affecting his independence.
- An extended audit report There are some changes in the structure and content of the audit report. The main change relates to the obligation to include the “key points of the audit” in all the reports related to the PIEs.
- A new public control of statutory auditors A new entity is created called “Collège de Supervision des Réviseurs d’Entreprises” / “College van toezicht op de bedrijfsrevisoren”, which is in charge of the control of the quality of the work of statutory auditors and the supervision of the profession.
The “Institut des Réviseurs d’Entreprises” / “Instituut voor bedrijfsrevisors” (“IRE”) has not been abolished, but it will no longer have the power to supervise statutory auditors. However, the IRE still has the power to propose new rules and recommendations applicable to statutory auditors and to issue advices and communications. The IRE also keeps its competences regarding the ongoing training of statutory auditors and the organization of the access to the profession.