L’indépendance du commissaire De onafhankelijkheid van · PDF file♦ PIE...

L’indépendance du commissaire

De onafhankelijkheid van de commissaris

Piet Hemschoote

♦ Introduction

♦ International Framework♦ IESBA (IFAC Code of Ethics)

1. Principles2. Key changes

♦ US SEC independence rules1. Principles2. US SEC audit client3. Non-audit services4. Other considerations regarding Belgian requirements

♦ IESBA vs US SEC independence rules1. Overriding principles2. Comparison of matters relating to professionals3. Comparison of matters relating to services to audit clients

♦ Belgian Framework♦ Revised Law of 22 July 1953♦ Company Code, article 133♦ Company Code, article 134♦ Standard of the IRE/IBR related to certain aspects of the auditor’s independence♦ Personal independence requirements

Content

Introduction - Independence

Regulators and professional standards require the auditor to be independent at all times with respect to audit clients

♦ Laws and regulations:• IESBA (IFAC Code of Ethics) • Belgian legislation• Professional organization (IBR/IRE)• US SEC rules• Any other National regulations, when required

♦ Scope of the laws and regulations affect both:• Professionals• Member Firms

Introduction

1. Principles:

♦ Applies to all professional accountants♦ Model for all Codes of Ethics developed and used by national accountancy

organizations♦ Conceptual approach to independence based on 3 principles:

♦ identification of threats to independence, ♦ evaluation of the significance of the threats to independence♦ application of appropriate safeguards to eliminate or reduce the threats to

acceptable level

♦ New Code issued in July 2009

IESBA (IFAC Code of Ethics)

International Framework – IFAC Code of Ethics

2. Key changes introduced by the new code :

♦ New concepts and provisions♦ Modified concepts and provisions

♦ Public interest entities♦ Key audit partner

♦ Split of Independence Section in♦ Section 290 – Audit and Review Engagements ♦ Section 291 – Other Assurance engagements

� Provide more direct guidance for those who perform only audit engagements.

IESBA – Key Changes


IESBA –Key Changes

♦ Definitions♦ Public interest entities (PIE’s):

► Listed entities► Any entity defined by a regulator or by legislation as a PIE► Entities for which the audit is required by regulation or legislation to be

conducted in compliance with the same independence requirements that apply to the audit of listed entities

♦ PIE definitions already exist in all EU countries, Japan, US and many South-American countries

♦ Most commonly included in the definition are banks, insurance companies and certain types of investment funds


IESBA – Key Changes

♦ Definitions♦ Key Audit Partner (KAP)

► The engagement partner,

► The independent reviewer,

► Other audit partners who make key decisions or judgments on significant audit matters. Depending upon the circumstances and the role of the individuals on the audit, other “audit partners” may include, for example, audit partners responsible for significant subsidiaries or divisions.

► Used in Rotation and Cooling Off related to employment relationship (PIEs), and Compensation and Evaluation (all audit clients)

► Complexities associated with the definition: generally considered to be 20% or greater of the group



♦ Definitions♦ Engagement team

► All partners and staff performing the engagement and any individual engaged by the firm or a network firm who perform assurance procedures on the engagement.

► This excludes auditor’s external experts engaged by the firm or a network firm.


♦ Lesser independence requirements for restricted use audit reports► Certain modifications to the independence requirements may be made

with the explicit agreement of the intended users : application of « Independence light » requirements

► Only where the report includes a restriction on use and distribution► Only when the users of the report are knowledgeable as to the purpose► Not applicable for audits required by law or regulation.



♦ Rotation: extension of the existing requirements to KAP’s and PIE’s

♦ Restricted employment relationship with PIE’s♦ 12 months cooling off period (audit period) is required before any

KAP may join an audit client♦ 12 months cooling off period (calendar) is required before a

country managing partner may join an audit client of the country♦ Compensation and evaluation :

♦ KAP shall not be evaluated on or compensated based on the partner’s success in selling non-assurance services to their audit clients

♦ A self-interest is created when a member of the audit team is evaluated on or compensated for selling non-assurance services to the audit client



♦ Non-Audit services:– Stricter provisions for valuations services– Provisions for certain tax services – Stricter provisions for IT systems services– Internal Audit Services– Corporate finance services

See details further


♦ Introduction

♦ International framework♦ IESBA (IFAC Code of Ethics)

1. Principles2. Key changes to the Code of Ethics



♦ Implementation of the Directive of 17 May 2006 on st atutory audits of annual accounts and consolidated accounts

♦ Revised Law of 22 July 1953♦ Company Code, article 133♦ Company Code, article 134♦ Standard of the IRE/IBR related to certain aspects of the auditor’s independence

Content

1. Principles

♦ Rules-based approach♦ Four principles underlying the US SEC independence rules:

– An auditor cannot audit his/her own work– An auditor cannot function in the role of management or an employee– An auditor cannot serve in an advocacy role for her/his client– An auditor cannot create a mutual or conflicting interest wit her/his client

US SEC Independence rules

International Framework – US SEC Independence Rules

2. US SEC audit client

US SEC audit client means a US SEC issuer or registrant whose financial statements or other information is being audited, reviewed or attested and any affiliates of the US SEC audit client or any other entity subject to the US SEC independence requirements



An affiliate of a US SEC audit client means:• An entity that has control over the US SEC audit client, or over which the US SEC audit client has control, or which is under common control with the US SEC audit client, including the US SEC audit client’s parents and subsidiaries• An entity over which the US SEC audit client has significant influence, unless the entity is not material to the US SEC audit client• An entity that has significant influence over the US SEC audit client, unless the US SEC audit client is not material to the entity• Each entity in the investment company complex when the US SEC audit client is an entity that is part of an investment company complex.



SEC audit client

C: Ultimate parent A is not matenal to C

F: Inves10t" G: Investor

I F n;IS significant G has sign cant inOJ ence influence

I I A ~ ma~eriaJ to F A is nCY< mat al toG

l.: B's sis1er 8 : Parent L is matHiaJ to C A is m.atenal to B

I I I The « aud it cl i ent » is

identified in gr ey shaded K: A's sistef' J : A's s.."'Ster A: Audit dient boxes.

KIS not m.neri to 8 J is material to B SEC

I I I I

0: Subsidlory' E.: Subsidiary H: Inves:ee I: ves!ee o is ma~eria1 ~o A E is not ma:eri toA H is mate:rial to A I rs nct ma!etÎ a l 10 A

S!J ERNST & YOUNG Qua/ity In Everything We Do

3. Non-audit services

♦ Prohibition from providing certain non-audit services to a US SEC audit clientExamples:

♦ management activities♦ accounting services♦ preparation of statutory financial statements (exception for immaterial subsidiaries)♦ corporate secretarial activities♦ payroll services♦ internal audit outsourcing services♦ information technology systems services♦ litigation support services

♦ Pre-approval by the audit committee of any non-audit service to a US SEC audit client (issuer and subsidiaries). Services may not be commenced without audit committee's pre-approval



♦ Non-audit services to certain affiliates of US SEC audit clientsThe following services may not be provided unless it is reasonable to conclude that the results of the services will not be subject to the US SEC audit client’s audit procedures (rebuttal presumption)

– Design and implementation of financial information systems– Bookkeeping and payroll– Appraisal, valuations– Tax provisioning– Actuarial– Internal audit outsourcing– Affiliates concerned by this rebuttal presumption are: parent/investor affiliate of

a US SEC client, in so far this parent/investor affiliate is not audited by the audit firm



– these services must not involve any management functions– these services must not affect the financial statements of our audit client or

result in a work-product that will be used in any way by our audit client

Example: otherwise prohibited service to a parent affiliate of the US SEC audit where the parent affiliate is not an audit client



4. Considerations regarding Belgian requirements

♦ Contribution in kind reports– The US SEC rules view contribution in kind reports as a fairness

opinion (which is prohibited under the US SEC rules)– Confirm that the value of the contribution in kind is not overstated

(validation of the corresponding capital increase– Acceptable if internal re-organization only (which does not affect

consolidation).

♦ Cap on liability – Imposed by Law in Belgium (not subject to be negotiated)– Prohibition on a capping of the liability under the US rules unless

indemnification arising from the law– Capping of the liability is being considerated in the US



♦ Inspections of Foreign Registered Public Accounting Firms

Every registered public accounting firm shall be subject to inspections in order to assess the degree of compliance of each registered public accounting firm and associated persons of that firm with the Act, the Board's rules, the rules of the Commission, and professional standards (PCAOB rule 4000).PCAOB may also fully rely on inspections performed by the local authorities (PCAOB rule 4012)

Current matters:► Reciprocal inspection systems (solved in US)► Confidentiality

US SEC


♦ Introduction



♦ US SEC independence rules1. Principles2. SEC audit client3. Non-audit services4. Other considerations regarding Belgian requirements


♦ Implementation of the Directive of 17 May 2006 on st atutory audits of annual accounts and consolidated accounts

♦ Revised Law of 22 July 1953♦ Company Code, article 133♦ Company Code, article 134♦ Standard of the IRE/IBR related to certain aspects of the auditor’s independence

Content

IESBA – US SEC

1. Overriding principles

International Framework – IFAC vs US SEC

SEC IESBA

• The auditor must be independent in fact and in appearance

• The auditor must be independent in mind and in appearance

• The auditor should not have a mutual or conflicting interest with the audit client

• The auditor must evaluate threats to independence related to self-interest

• The auditor should not be acting in the capacity of management or an employee of the audit client

• Certain managerial activities create a self-interest or self-review threat so significant, no safeguards would be sufficient to reduce threats to independence to an acceptable level

• The auditor should not be in a position of being an advocate for the attest client

• The auditor must evaluate threats to independence related to advocacy

• The auditor should not be in a position to audit his own work

• The auditor must evaluate threats to independence related to self-review

IESBA vs US SEC independence rules:

2. Comparison of matters relating to professionals

♦ Rotation♦ Employment relationship♦ Financial interests♦ Business relationship

Overview


♦ Rotation

IESBA – Code of Ethics:► Key audit partner for PIE’s► 7 years + cooling-off period of two years ► Limited flexibility for small firms when independence regulator has

provided an exemption and specified safeguards

IESBA – US SEC


♦ Rotation

US SEC rules:► Lead audit partner and review partner 5 years on/ 5 years off► Other audit engagement team partner : 7 years on/ 2 years off

� >10 hours of audit, review or attest services on registrant/parent company� Lead partner on any audit or review of a significant subsidiary (greater than

20% of consolidated assets or revenues of the US SEC audit client). For subsidiaries that do not meet the 20%, no rotation required

► Partners from non US accounting firms received a fresh start as of the beginning of the first fiscal year after 6 May 2003 (e.g. 2004 for calendar year companies; rotation required after the audit of the 2008 accounts)

IESBA – US SEC


♦ Employment relationships with an audit clientIESBA – Code of Ethics:

Cooling-off for employment relationship with an audit client:► Extended to KAP’s for PIE’s► Restricted period: 12-month period covering a full audit cycle

Employment relationship – family members of professionals:► A professional may not participate in the audit engagement when spouse or

dependent holds a prohibited position at the client (i.e. executive, managerial or supervisory position where financial reporting could be influenced)

Safeguards: involve an additional reviewer

IESBA – US SEC


♦ Employment relationships with an audit clientUS SEC rules:

Cooling-off for employment relationship with an audit client:► All professionals of the audit engagement team who worked > 10 hours► Restricted period: 12-month period► Affected position at the client: prohibited position

Employment relationship – family members of professionals:► A partner or professional employee may not participate in the audit

engagement of a US SEC audit client where their spouse or dependent is employed irrespective of the position at the client

IESBA – US SEC


♦ Financial InterestsIESBA – Code of Ethics: ► Consideration should be given to the role of the person holding the financial

interests, to the materiality of the financial interest and to the fact that the individual has no control over the investment vehicle or the financial interests held;

► Members of the audit team are prohibited from holding a financial interest in an audit client; same prohibition for the partner in the office in which the lead audit engagement partner is located

► Extended to the immediate family (spousal and financially dependent individuals)

► Safeguards: ► Disposal of the financial interests prior to becoming a member of the audit team;

remove the individual from the audit engagement► Additional reviewer► Immediate disposal for members of audit team (and immediate family)

IESBA – US SEC


♦ Financial InterestsUS SEC rules:

Direct financial interests in a US SEC audit client (owned directly by and under the control of an individual or entity; or beneficially owned through a collective investment vehicle, estate, trust or other intermediary over which the individual or entity has control)Prohibited regardless of the materiality for all partners and for professional employees if they are a covered person (audit engagement team; chain of command; partners and managerial employees who provided > 10 hours of non audit services; any partner located in the office in which the audit partner in charge of the client is located) Includes spousal and dependents.

Indirect financial interests: (beneficially owned through a collective vehicle, estate, trust or other intermediary over which an individual has no control)Prohibited for partners and covered employee if material to their net worth (>5% or >20% of the total funds invested by the investment vehicle*). Includes spousal and dependents.*treated as a direct interest and therefore proscribed

IESBA – US SEC


♦ Business relationshipsIESBA – Code of Ethics:► Purchase of Goods and Services : Generally permissible as consumer in

ordinary course on arms length basis unless magnitude creates a dependency situation.

► Joint Investment and Alliances : Not permitted► Other Cooperative Business Relationship : Direct and indirect business

relationships are generally permissible if immaterial and clearly insignificant.

US SEC rules:► Purchase of Goods and Services : Generally permissible as consumer in

ordinary course on arms length basis unless magnitude creates a dependency situation.

► Joint Investment and Alliances : Not permitted► Other Cooperative Business Relationship : Direct business relationships are

prohibited regardless of materiality or significance. Indirect relationships are generally permitted if immaterial and clearly insignificant.

IESBA – US SEC


Examples of business relationships:► Joint investment and alliances: partnerships, common branding, sharing of

revenues, profits, resources or costs, exclusivity referral agreements,…► Other cooperative business relationship: sub-contractor, sponsorship,

consultant, acting as a lessor or lessee, …

IESBA – US SEC


IESBA vs US SEC independence rules:

3. Comparison of matters relating to non-audit services to audit client

♦ Valuations♦ Tax services♦ IT systems services♦ Internal audit services♦ Corporate finance services

Overview


♦ ValuationsIESBA (IFAC Code of Ethics):► PIE ’s: prohibits valuation that are material for the audit’s client financial

statements (previously permitted if not involving significant subjectivity)► Non-PIE’s : prohibits valuations that are material for the audit’s client financial

statements and involve significant degree of subjectivity

IESBA – US SEC


♦ ValuationsUS SEC rules:► Appraisal, valuations and any services involving a fairness opinion are

prohibited except1. valuations reviews of the work management or independent third party

valuation specialists as part of audit of financial statements2. tax related valuations (tax compliance purposes, (including transfer pricing)

reporting obligations, or for tax planning and implementation purpose)3. valuations related advice, assistance, data gathering where it does not

constitute a formal calculation, determination, estimate, opinion or recommendation of value.

IESBA – US SEC


♦ Tax servicesIESBA – Code of Ethics:The code contains new provisions relating to threats that are created by certain tax services. The provisions address tax services under 4 broad headings► Tax return preparation► Tax calculation for the purpose of preparing the accounting entries► Tax planning and other Tax advisory services ► Assistance in resolution of tax disputes

IESBA – US SEC


♦ Tax servicesIESBA (IFAC Code of Ethics):► Tax compliance service: no independence issue if management is

responsible for the tax return and the significant tax judgments► Tax calculations for the purpose of preparing the accounting entries

are prohibited for PIE if material to the financial statements on which the firm express an opinion.

IESBA – US SEC

♦ Tax servicesIESBA (IFAC Code of Ethics):► Tax planning and other Tax advisory services : prohibited if

► the effectiveness of tax advice depends upon a particular accounting treatment or presentation and there is a reasonable doubt thereon, and

► Material effect on the financial statements

► Assistance in the resolution of tax disputes: prohibition on court representation where amounts are material to financial statements

IESBA – US SEC

♦ Tax servicesUS SEC rules:► Tax compliance : generally ok (signing document -including tax return- on

client’s behalf is an act of management)► Tax advisory services:

► Additional rules related to the prohibition of confidential transaction and aggressive tax position transaction (US SEC 19 April 2006)

► Tax court proceedings are prohibited► Tax services to restricted FRORs or its immediate family except for the

following very limited except► A FROR of a non-material, non-audit affiliate of the US SEC audit client

IESBA – US SEC


♦ Tax servicesUS SEC rules:► Tax provisioning (services affecting the accounts , having more than an

insignificant on the audit engagement : affecting audit procedures or producing information used as audit evidence) is prohibited with an exception for the immaterial subsidiary if ► The client accepts responsibility for the financial statements, ► The client has prepared the source documents for all transactions,► The client maintains accounting control over data► There is no act of management► The subsidiary tax provisions are prepared on basis of an accounting different from

that of the consolidated statements of the US SEC audit client or are prepared after the consolidated statements

IESBA – US SEC

♦ IT systems servicesIESBA (IFAC Code of Ethics):

► PIE’s : prohibited if the services involving the design or implement financial of IT systems :► Form a significant part of the internal control over financial reporting, or► Generate information that is significant to the audit client’s accounting records or

financial statements

US SEC rules:The following are prohibited:

► Design or implement financial information technology systems significant to the client’s financial statements

► Operate or supervise the operation of an audit client’s information system or managing the audit client’s network

► Take the responsibility for the design and implementation of internal accounting or risk management function


IESBA – US SEC

♦ Internal audit services IESBA (IFAC Code of Ethics):

► New prohibition for Internal audit services provided to PIE that related to related to ► A significant part of the internal controls over financial reporting► Financial accounting systems that generate information that is, separately or in the

aggregate, significant to the audit client’s accounting records or financial statements, or

► Amount or disclosures that are, separately or in the aggregate, material to the financial statements.

IESBA – US SEC


♦ Internal audit servicesUS SEC rules:

► Prohibition of internal audit services that relate to the audit’s client internal accounting controls, financial systems and financial statements

► Operational auditing allowed provided there is no outsourcing► Non-recurring evaluations of discrete items allowed provided there is no

outsourcing

IESBA – US SEC


♦ Corporate finance serviceIESBA – Code of Ethics:►Corporate finance services cover : assisting a client in developing corporate strategies, identifying possible targets for the client to acquire, advising on disposal transactions, assisting finance raising transactions or providing structuring advice►Prohibition if the effectiveness of the advices depends on a particular accounting treatment or presentation in the financial statements and;

► The audit team has reasonable doubt as to the appropriateness of the related accounting treatment or presentation, and

► The outcome or consequence of the corporate advice will have material effect on the financial statements of the audit client

► Similar to the position on “aggressive” tax services.

IESBA – US SEC

♦ Corporate finance serviceUS SEC rules:

The US SEC rules regarding broker-dealer, investment advisor or investment banking prohibit: ► acting as a broker-dealer (registered or unregistered), promoter, or underwriter on

behalf of an audit client; making investment decisions on behalf of the audit client or otherwise having discretionary authority over an audit client’s investments; executing a transaction to buy or sell an audit client’s investment; or having custody of assets of the audit client, such as taking temporary possession of securities purchased by the audit client

IESBA – US SEC

♦ Introduction





♦ Implementation of the Directive of 17 May 2006 on st atutory audits of annual accounts and consolidated accounts ♦ Revised Law of 22 July 1953♦ Company Code, article 133♦ Company Code, article 134♦ Standard of the IRE/IBR related to certain aspects of the auditor’s independence

Content

The EU Directive of 17 May 2006 on statutory audits of annual accounts and consolidated accounts has been implemented via Royal Decrees of 2007, April 21 and 25 modifying respectively the Law of 22 July 1953 relating to the creation of the IBR-IRE and the Company Code

IBR-IRE issued a standard related to certain aspects of the auditor’s independence (30 August 2007)

Law of 17 December 2008 related to the Audit Committee requirements for listed companies and financial entities

Article 135 of the Company code (modified by the law of 17 December 2008) providing the obligation for the statutory auditor and the client to inform the authorities responsible for public oversight in case of dismissal and resignation

Audit Directive of 17 May 2006

Implementation Audit Directive of 17 May 2006

♦ No stronger requirements in matter of ethics and independence; ♦ General principle over independence requirements (article 14 and article 133

§§1and 2 of the company code)♦ Incompatibilities (art 13, §§ 2 & 3)

► Absolute interdiction replaced by incompatibility regime : (1) maintain the quality of IBR/IRE member but (2) prohibit to perform audit engagement (revisorale opdracht/mission de revision) in some circumstances :► Employment relationship except with auditors and audit firms or education► Direct or indirect commercial activity (notably as director), except for civil companies

having a commercial form► Political function (minister or state secretary)

► Exemption can be granted for employment relationship or commercial activity by the Institute.

Revised Law of 22 July 1953


– No changes regarding the scope and the calculation of one to one rule since July 2006► Listed entities or part of group that is required to prepare and publish

consolidated accounts► Global yearly basis at the level of the Belgian controlling company► Include audit fees and non audit fees from all Belgian and foreign subsidiaries► Excluded from the ratio : due diligence and auditor’s legal assignments

– Obligation to disclose any exemption to the one to one rule (granted by the audit committee or by Accom) and the inherent motivation in case the one to one rule has been exceeded.

Company Code, article 133



► Exemptions granted by the audit committee :► Entities that are legally required to have an audit committee (large listed and

large financial service)► exemption only granted by this “legal” audit committee

► Entities that are not required by the law to have an Audit Committee► Board of Directors (Small Belgian listed and small financial entities where tasks of the

AC are carried out by the Board of Directors) provided ► At least one independent member and► The chairman does not act as president in that vote if he is a company executive► Any independent members should have voted in majority in favour of the exemption

► audit committee of the parent entity (set up in accordance with laws of any members countries of the EU or OECD; no competence requirements).

► Automatic exemption in case of joint audit (except for entities that are required by law to have an audit committee)

Other disclosure to the audit committee

Auditors required to report on their independence to the audit committee

► Confirm annually in writing their independence► Disclose annually any additional services provided to the entity► Discuss and document the threats to independence and the safeguards

applied

– Public disclosure of the audit fees mandatory for all companies where an auditor is appointed (not only for listed companies or entities that are required to establish and to publish consolidated statements);

– Non-audit fees disclosed through three categories (Other assurance engagements; Tax advices; Engagements other than those covered by the statutory audit)

– Non-audit fees related to services provided by the Belgian auditor and its network (Belgian and foreign) for the audit client and its subsidiaries located in Belgium and abroad.

– Disclosure of the audit and non-audit fees on the group-level also applicable to the companies “head of a group” that have an exemption of consolidate (Company Code, art.113) and that forms part of a small group (Company Code, art.112).




► For Belgian stand alone companies where appointed as statutory auditor

Audit fees (voted by general meeting of shareholders)

Notes of the Belgian statutory accounts

Non-audit fees (3 categories) related to services provided by the statutory Auditor:-Other assurance engagement-Tax advice-Other engagements


Non-audit fees (3 categories) related to services provided by the Belgian and foreign network of the statutory Auditor:-Other assurance engagement-Tax advice-Other engagements




► For groups► Situation 1: Consolidation at the Belgian level and appointed as Auditor at the

consolidated level (referred to as the “Belgian Audit Client”)

Audit fees for:-Belgian Audit Client;-All its Belgian and foreign subsidiaries.

Notes of the consolidated statements.Any Belgian subsidiary audited is also required to disclose the Audit fees in its Belgian statutory accounts.

Non-audit fees (3 categories) related to services rendered by the statutory Auditor for:-Belgian Audit Client;-All its Belgian and foreign subsidiaries;

Notes of the consolidated statements.Any Belgian subsidiary audited is also required to disclose the Non-audit fees in its Belgian statutory accounts.

Non-audit fees (3 categories) related to services rendered by the network for:-Belgian Audit Client;-All its Belgian and foreign subsidiaries.

Notes of the consolidated statements.Any Belgian subsidiary audited by is also required to disclose the Non-audit fees in its Belgian statutory accounts.



► For groups► Situation 2: Appointed as Auditor of the Belgian ultimate parent (Head of Group) of

companies exempted from consolidation or the Belgian ultimate parent of a small group (referred to as the “Belgian Ultimate Parent”).

Audit fees for:-Belgian Ultimate Parent; -All its Belgian and foreign subsidiaries.

Notes of the Belgian statutory accounts of the Belgian Ultimate Parent,Any Belgian subsidiary audited is also required to disclose the Audit fees in its Belgian statutory accounts.

Non-audit fees (3 categories) related to services rendered by the statutory auditor for:-Belgian Ultimate Parent; -All its Belgian and foreign subsidiaries.

Notes of the Belgian statutory accounts of the Belgian Ultimate ParentAny Belgian subsidiary audited is also required to disclose the Non-audit fees in its Belgian statutory accounts.

Non-audit fees (3 categories) related to services rendered by the network for:-Belgian Ultimate Parent; -All its Belgian and foreign subsidiaries.

Notes of the Belgian statutory accounts of the Belgian Ultimate Parent Any Belgian subsidiary audited is also required to disclose the Non-audit fees in its Belgian statutory accounts.


♦ Royal Decree of 31 January 2001, article 183 ter (modified by the Royal Decree of 2003 April, 4 on prohibited services):

1. Acting as management2. Assisting or providing bookkeeping, preparing and establishing financial

statements or consolidated accounts for the audit entity (regardless of the materiality)

3. Design and implementation of financial information systems4. Performing valuation on data that will be part of the financial statements or the

consolidated accounts of the audit client where the subject of the valuation is material

5. Participating to the internal audit6. Representing the audited entity before any jurisdiction in a dispute7. Recruiting personnel to fill a management function in the entity

Prohibited services for the Belgian audit client, the Belgian subsidiaries and the Belgian entity which controls the Belgian audit clientFor the foreign subsidiaries, prohibited if services performed by Belgian auditor or Belgian network

No changes since the Law of 20 July 2006

Royal Decree of 4 April 2003


IESBA-Belgian rules

► Belgian prohibition for designing and implementing financial information systems is similar to IESBA► but cover all Belgian audit clients and their subsidiaries (no distinction between the

type of clients vs PIEs)► services provided by foreign network for foreign entities are out of the scope of the

Belgian law on prohibited services► No materiality thresholds

► Belgian prohibition for participating to the internal audit function is similar to IESBA► but cover all Belgian audit clients and their subsidiaries (no distinction between the

type of clients vs PIEs)► services provided by foreign network for foreign entities are out of the scope of the

Belgian law on prohibited services► Based on the threat of self-review, no materiality thresholds

IESBA-Belgian rules

► IESBA and Belgian rules treated tax valuations as any other valuations: ► Belgian prohibition for performing valuation services on data that will be

part of the financial statements or the consolidated accounts of the audit client where the subject of the valuation is material

► IESBA : new prohibition on a service where the effectiveness of tax advice depends upon a particular accounting treatment or presentation and there is a reasonable doubt thereon and the effect on the financial statements is material

IBR/IRE’s standard related to certain aspects of the auditor’s independence

• Enforcement on 29 June 2008• Conceptual approach to independence (threats and safeguards)• Independence of mind and independence in appearance

IBR/IRE’s standard independence


• General independence principles remain unchanged meaning that special care should be given to provide services that would lead to a self-review risk.

• Independence considerations regarding non-audit services rendered before an appointment as auditor:� The auditor cannot render non-audit services that could be a threat to

independence in the 2 years before an appointment� The auditor can accept the mandate if adequate safeguards could be put in

place (risk and safeguards must be documented in the audit file) � If safeguards are not sufficient, the auditor must refuse the mandate� Bookkeeping and executive recruitment services done in the 2 years before

any appointment would impair auditor’s independence unless exceptional documented circumstances exist



• Fees:� Contingent fees (audit fees; non-audit fees arrangement)� Financial dependency when 20% of the total fee income (audit and non audit

fees of the auditor and its network) is derived from one audit client (and its affiliates) over a three-year period

� Relation between audit fees and non-audit fees: risk assessment for all audit clients

� Overdue fees



• Rotation� Only for PIE’s (Law of 22 July 1953, art 2, 7°):

– Listed companies– Credit institutions– Insurance companies– Applicable to significant subsidiaries of PIE’s (Belgian and foreign)-

“significant” has not been defined

� Some regulated entities are not subject to partner’s rotation under Belgian law (pension funds, sociétés de bourse/ beursvennootschappen)

� Engagement audit partner � 6 years � 2 years cooling off period



Personal independence requirements

♦ Personal relationships♦ 2 years Cooling off period ♦ Auditor is prohibited to be appointed as director, officer or any equivalent position

for an audit client and entities linked with the audit client♦ Professionals are prohibited to hold positions (director, officer or any equivalent

position) with an audit client

♦ Financial relationships :♦ Prohibition to hold a financial interest in an audit client (even in case of inheritance

or gift; in this case, the financial interest must be disposed shortly)♦ It doesn’t apply in case of indirect financial interest : no control and no possibility to

control the investments made through the vehicle and the possibility to withdrawn from the financial relationship

♦ Loans or mortgage with audit client are prohibited : grandfathering for loans and mortgages concluded before the auditor’s appointment.

Personal independence requirements

♦ Family & personal relationships► Incompatibility if :

► immediate family member (spouse, or equivalent and family member up to 2°degree) controlling the audit client, director or any other key function

► immediate family member is in a position to exert direct influence on the preparation of the Audit Client's accounting records or financial statements

► Applicable not only to statutory audit but also to all “revisorale opdracht/mission revisorale”

► Applicable to the audit firm and his partners

Compliance & Monitoring

Compliance activities related to professionals :

► Partners and Executives personal independence compliance testing ► Annual independence confirmation/ Quarterly independence confirmation for partners► Annual directorships confirmation (personal appointment, including immediate family members)► Annual business relationship confirmation.

Compliance activities related to engagements :

► Compliance testing program to identify non permitted services based on selected engagement :► Control of the scope engagement► Verification of the client/engagement acceptance/continuance► Compliance with pre-approval and approval requirements► Compliance of the engagement letter (scope, limitation of liablity)► Checks over (potential) conflict of interests

► Every two months, control of the services performed on SEC clients through the hours charged on the client during that period

► Data quality controls► Quarterly reporting control over the OTO► Yearly compliance check over the partners rotation

L’indépendance du commissaire De onafhankelijkheid van · PDF file♦ PIE...

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