EFAA: Latest News from Brussels

EFAA Leadership’s Activities

EFRAG General Assembly, 16 December 2021
Salvador Marin, Paul Thompson and Sara Zambelli participated in this online meeting. EFAA is supportive of EFRAG’s future governance and finance proposals and looks forward to making a substantial contribution to the proposed new sustainability pillar that will develop sustainability reporting standards including a set for voluntary use by SMEs. Read more under ‘Sustainability Reporting and Assurance Update’ below.

Audit Meeting, 16 December, Madrid
Salvador Marin, EFAA President, participated in a hybrid event to present the book “public accounting“. The event was attended by over 500 participants.

SMEunited General Assembly, 9 December 2021
Sara Zambelli participated in this event. Petri Salminen was voted in as the new President for 2022-2023 from 1 January 2022. After his election Salminen stated the focus would remain on the recovery of SMEs following the pandemic crisis and allowing them to make the digital and green transformation as explained in the Press Release.

For more information: Please contact Salvador Marín

EFAA-IFAC EVENT – ‘Sustainability Offers New Opportunities for SMPs’, 15 December 2021

On 15 December 2021, EFAA and IFAC co-hosted a webinar  ‘Sustainability Offers New Opportunities for SMPs’. Over 500 participants from all over the world attended. View the event recording here. EFAA is an IFAC network partner and collaborates with IFAC on areas of mutual interest, in particular the growth and prosperity of SMPs through practice transformation. In his opening remarks, Salvador Marin stressed that EFAA is the leading voice for SMPs in Europe. SMPs are perhaps the most important provider of professional services to SMEs, as well as their most trusted adviser. As EFAA’s Call to Action stresses sustainability offers an opportunity for SMPs to broaden their service provision and help their clients become sustainable business. IFAC used the event to promote its recent publication, “Sustainability Information for Small Businesses: The Opportunity for Practitioners,” exploring the diverse benefits of embracing sustainability information. In his closing remarks Paul Thompson urged SMPs to embrace the opportunity and rise to the challenge in 2022, starting with a New Year’s Resolution to make 2022 a year of action.

EFAA has just created a library of resources, regularly updated, to help SMPs become sustainable here.

For more information: Please contact the EFAA secretariat

Sustainability Reporting and Assurance Update

Global
The Trustees of the IFRS Foundation have announced the appointment of Emmanuel Faber, former Chair of the Board and CEO of Danone, to serve as Chair of the International Sustainability Standards Board (ISSB), effective 1 January 2022. EFRAG has welcomed the nomination and looks forward to cooperation in the sustainability reporting standard-setting field in a co-construction spirit. Faber’s appointment follows the announcement at COP26 in November 2021 about the creation of the ISSB; the consolidation of the Climate Disclosure Standards Board and the Value Reporting Foundation (which houses the Integrated Reporting Framework and the SASB Standards) into the IFRS Foundation; and the publication of prototype general disclosures and climate disclosure requirements developed by the Technical Readiness Working Group – the IFRS Foundation has published a webcast presenting the Technical Readiness Working Group’s prototypes and other recommendations for consideration by the ISSB.  The IFRS Foundation Trustees have started the search for up to 11 members of the ISSB to work together with ISSB Chair Emmanuel Faber and the ISSB Vice-Chairs, who will be announced shortly, as explained here.

IFAC meanwhile has published its vision for high quality sustainability assurance. IFAC says that sustainability-related disclosure is finally taking its rightful place within the corporate reporting ecosystem but to be trusted must be subject to high-quality, independent, external assurance. IFAC’s vision addresses the importance of global standards, regulation that supports decision-useful disclosure, and the value of an interconnected approach to sustainability and financial information reporting and assurance. In this video IFAC explain the state of play in sustainability assurance. This article charts its emergence in the US and predicts growth in ESG assurance opportunities US CPA firms.

The IAASB is ramping up its efforts in relation to sustainability assurance as its chair Tom Seidenstein explains in this article. Seidenstein says the IAASB committed to do more work to enhance the assurance of sustainability/ESG reporting when it approved its new 2022-2023 work plan, A Public Interest Focus in Uncertain Times. The IAASB agreed to dedicate capacity and resources to the assurance of sustainability/ESG reporting. Information gathering and research activities, using dedicated staff resources, to determine future IAASB action will commence in January 2022. This initial work will also determine the precise scope and timing of the IAASB’s efforts. Seidenstein recognizes that ultimately the IAASB might develop a new subject-matter specific standard(s).

Europe
The European Financial Reporting Advisory Group (EFRAG) is on track to meet its ambitious timeline, six months into the drafting of European sustainability reporting standards (ESRS) while reforming its governance structure. EFRAG is currently seeking new members to join its sustainability reporting pillar. EFRAG’s next General Assembly meeting in which new member organisations can be admitted takes place on 21 January 2022. Expressions of interest should be received by 14 January 2022. EFRAG invites all organisations, including civil society, to join its new sustainability reporting pillar. Read the call for expressions of interest and the briefing note on qualification for EFRAG membership. EFAA will participate in the sustainability reporting pillar.

The European Commission is calling for candidates for the Chairs of the EFRAG Reporting Boards and has issued two calls for applications for the positions of Chair of the EFRAG Financial Reporting Board and Chair of the EFRAG Sustainability Reporting Board. In its calls for candidates (Financial Reporting – Sustainability Reporting), the European Commission sets out the requirements for the positions and describes the application and selection procedures. Applications should be submitted by email to FISMAC1@ec.europa.eu no later than 12:00 (mid-day) Brussels time on 1 February 2022. Read more here.

For more information: Please contact the Secretariat

European Commission and Parliament Developments: Quality Reporting and Enforcement, ESAP and DORA

As reported in previous newsletters in November 2021, the EC launched the much-anticipated consultation Strengthening of the Quality of Corporate Reporting and its Enforcement. The consultation aims to enhance the quality of corporate reporting by strengthening the three pillars of corporate governance, audit, and supervision. The consultation focuses on public interest entities (PIEs) and will directly feed into an impact assessment that the Commission will prepare in 2022. The deadline to respond to the consultation is 4 February 2022. Adoption date for legislative proposals is tentatively planned for Q4 2022. EFAA will respond to this consultation from the perspective of SMPs. In December 2021, EFAA convened a joint meeting of its EU Professional Regulation Expert Group and Assurance Expert Group to discuss and agree preliminary views.

The EC is proposing that by the end of 2024, the European Securities and Markets Authority (ESMA) sets up a European Single Access Point (ESAP) and invites feedback on these proposals by 8 February 2022. ESAP will host on a single digital platform all the regulatory information on activities and products that financial market participants must provide to supervisors. Non-listed entities, including SMEs, can make available information on a voluntary basis. The ultimate objective is to enable investors, financial analysts and intermediaries, public authorities, and civil society to make informed decisions. ESAP builds on existing EU disclosure requirements and does not introduce new reporting obligations. With respect to auditors, from 2026, there is a proposal for ESAP to provide access to a public register of auditors, details of sanctions imposed by the competent authorities, and transparency reports.

On 1 December 2021, the Digital Operational Resilience Act (DORA) was adopted on 1 December 2021 in the European Parliament’s Committee on Economic and Monetary Affairs (ECON). There was strong support for the compromise amendment to keep auditors in the scope but with an exemption for certain smaller audit practices. The next step is for the European Parliament to negotiate with the Council (which proposes to exclude auditors completely) to find a mutually agreeable compromise – read the adopted ECON position on DORA here.

For more information: Please contact Paul Thompson

Other Developments in International Standard Setting

General
Readers are reminded that the deadlines for providing input on the exposure draft (ED) of the International Audit and Assurance Standards Board (IAASB)’s proposed new stand-alone standard for audits of financial statements of LCEs – as summarized in this IFAC Gateway article – are imminent. EFAA’s Assurance Expert Group has met to discuss a first draft of EFAA’s response. EFAA encourages all its member organization and SMPs across Europe to respond to the ED in writing (by 31 January 2021) or respond to a survey to offer an alternative way to provide feedback (by 14 January 2022) which is available in English, French, and Spanish and responses are confidential. To learn more check out the IAASB three LinkedIn Live sessions on the new standard: watch first session on LinkedIn, watch second session on LinkedIn, and watch third session on LinkedIn.

At its December 2021 meeting – the meeting summary and agenda papers are here – the IAASB approved the project proposal on fraud focused on actions aimed at enabling consistent and improved auditor behaviour by revising ISA 240, The Auditor’s Responsibility to Consider Fraud and Error in an Audit of Financial Statements. At the same meeting the IAASB approved the revised standard on group audits, International Standard on Auditing (ISA) 600 (Revised). Once approved by the Public Interest Oversight Board the IAASB will publish the standard together with implementation material in Q2. This standard will be effective as of 15 December 2023.

Audit, Assurance and Quality Management
The IAASB’s revised agreed-upon procedure (AUP) – International Standard on Related Services (ISRS) 4400 (Revised)Agreed-Upon Procedures Engagements – becomes effective on 1 January 2022 as this article explains. AUP engagements are widely used in many jurisdictions and demand for AUP engagements continues to grow, particularly related to needing increased accountability around funding and grants. Changes in regulation have also driven increased demand for AUP engagements, especially from SMEs, as increased audit exemption thresholds in some jurisdictions prompt stakeholders to look for alternative services to an audit or other assurance engagements. The IAASB revised the AUP standard in response to this growing demand.

This is a critical time for SMPs as many standards are evolving. Perhaps the most important are the suite of new and revised quality management standards recently approved by the IAASB.  This article says that preparing for their implementation should be a priority for SMPs, as systems of quality management in compliance with this ISQM are required to be designed and implemented by 15 December 2022.
On 30 November 2021, Paul Thompson and Hysen Cela, a member of EFAA’s Assurance Expert Group, participated in the IAASB CAG Meeting to discuss a project proposal for the revision of ISA 240, The Auditor’s Responsibility to Consider Fraud and Error in an Audit of Financial Statements. The meeting recording is here and the papers here. Paul stressed the need for the need to ensure scalability of the revised ISA and the need for examples of fraud from small and less complex entities. Recently ACCA published the report Closing the expectation gap in audit – the way forward on fraud and going concern: A multi-stakeholder approach which sets out recommendations based on research. Test your understanding of ISA 240 here (AU-C Section 240 is identical to ISA 240).

Finally, the IAASB has just released non-authoritative support material to help auditors understand how to plan an audit under International Standard on Auditing (ISA) 300, Planning an Audit of Financial Statements, when using automated tools and techniques (ATT).

Ethics
As technology advances and the world becomes more complex, the professional accountant’s skills and competencies, underpinned by ethics and recognizing their public interest responsibility, are critical in navigating new challenges and opportunities and ensuring trust in the profession. To help professional accountants and stakeholders better understand these topics, the International Ethics Standards Board for Accountants (IESBA), IFAC and two IFAC members, have released Technology is a double-edged sword with both opportunities and challenges for the accountancy profession, the second in a four-part thought leadership series examining the professional accountant’s role in a new technological era. The publication examines the impact of rapid technological change and the importance of ethical leadership from the lens of the professional accountant. It also provides practical guidance to both professional accountants and professional accountancy organizations. The publication is available here. The meeting highlights from the IESBA’s November-December 2021 are available here.

The Board approved revisions to the IESBA Code related to definitions of listed entity and public interest entity (PIE) and quality management conforming amendments. It also approved two exposure drafts related to technology and engagement team-group audits.

Reporting
EFRAG has issued a feedback statement that summarises the findings from the field testing conducted with preparers, on the proposals in the IASBs Exposure Draft (“ED”) Disclosure Requirements in IFRS Standards — A Pilot Approach (Proposed amendments to IFRS 13 and IAS 19). Read more here.

For more information: Please contact Paul Thompson

EFAA Member Initiative: OCC’s Accountant’s Agenda 2022

To help SMPs and their SME clients come through the COVID-19 crisis stronger, smarter and sustainable EFAA has a specially curated list of free guidance here. This guidance will enable SMPs to better manage their practices and provide high quality services to their SME clients. The following is the most recent addition:

Readers interested to know how US SMPs are faring might wish to listen to the AICPA Small Firm Update podcast from 14 December 2021 here and read about the attributes of US top-performing (small) accounting firms revealed here. US SMPs have successfully pivoted during the pandemic so European SMPs stand to learn from their experiences. Meantime this article explains how in the UK a spate of resignations and an increasingly stretched labour market have highlighted glaring skill gaps in the professional services and finance sectors. This demands SMPs to be adaptable and to consider outsourcing.

The EC has a website, Access2Markets, to help SMEs, and their SMP advisors seeking to internationalise. Access2Markets is a free online portal with everything SMEs, and their SMP advisors, need to know to export and import with countries outside the EU: tariffs and taxes; product rules and requirements; step-by-step guides on procedures and formalities; a self-assessment tool for rules of origin; useful information on EU trade deals and their benefits; and much more. The EC has put together a digital information kit with useful materials that can be downloaded in many different languages, here. Further information can be found on the portal itself at Access2Market.

For more information: Please contact Paul Thompson

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Stéphane De Bremaeker

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