S.I. No. 312/2016 - European Union (Statutory Audits) (Directive 2006/43/EC, as amended by Directive 2014/56/EU, and Regulation (EU) No 537/2014) Regulations 2016

• (b) where any of the undertakings is a public-interest entity, the group auditor shall bear the full responsibility for ensuring that the requirements of Articles 10 and 11 of Regulation (EU) No 537/2014 are met in relation to the audit carried out on that public-interest entity.

• (2) The group auditor shall—

• (a) evaluate the audit work carried out by any statutory auditors for the purpose of the group audit, and

• (b) document the nature, timing and extent of the work carried out by those auditors, including the group auditor’s review of the relevant parts of audit documentation.

• (3) For the purposes of the group audit, auditors may be one or more of the following:

• (a) statutory auditors;

• (b) statutory audit firms;

• (c) Member State auditors;

• (d) Member State audit firms;

• (e) third-country auditors;

• (f) third-country audit entities.

• (4) The group auditor shall carry out a review, and maintain documentation of such review, of the work of whoever referred to in paragraph (3) performed audit work for the purposes of the group audit.

• (5) The documentation referred to in paragraphs (2)(b) and (4) to be retained by the group auditor shall be such as enables the Supervisory Authority, or the recognised accountancy body where applicable, to conduct a quality assurance inspection or review, as the case may be, under Chapter 1 of Part 8.

• (6) The group auditor shall request the agreement of the auditors concerned referred to in paragraph (3)(a) to (f) to transfer relevant documentation during the carrying out of the audit of group financial statements as a condition of the reliance by the group auditor on the work of such auditors.

(7)(a) Where the group auditor is unable to secure an agreement referred to in paragraph (6), he, she or it shall take appropriate measures in order to form an audit opinion and inform the relevant Supervisory Authority or the recognised accountancy body where applicable.

• (b) Such measures shall, as appropriate, include carrying out additional statutory audit work, either directly or by outsourcing the additional statutory audit work, in the relevant subsidiary.

(8)(a) The group auditor who is subject to a quality assurance inspection or review or an investigation concerning the statutory audit of the group financial statements of a group of undertakings, shall, when requested, make available to the Supervisory Authority or the recognised accountancy body where applicable the relevant documentation he, she or it retains concerning the audit work performed by the auditors concerned referred to in paragraph (3)(a) to (f) for the purpose of the group audit, including any working papers relevant to the group audit.

• (b) The Supervisory Authority may request additional documentation on the audit work performed by a statutory auditor or audit firm for the purpose of the group audit from the competent authorities in other Member States where applicable pursuant to Chapter 1 of Part 10.

Further responsibility of group auditor

• (2) Where—

• (a) a statutory audit of the group financial statements of a group of undertakings is carried out, and

• (b) a parent undertaking or subsidiary undertaking of the group of undertakings is audited by one or more third-country auditors or audit entities that have no working arrangement as referred to in Regulation 131(1)(c) or 132(c),

the group auditor is responsible for ensuring proper delivery, when requested, to the Supervisory Authority of the additional documentation of the audit work performed by those auditors or audit entities, including the working papers relevant to the group audit.

• (3) To ensure such delivery, the group auditor shall retain a copy of such audit documentation, or alternatively—

• (a) agree with one or more third-country auditors or audit entities concerned arrangements for the group auditor’s proper and unrestricted access, upon request, to the documentation, or

• (b) take any other appropriate action.

• (4) Where audit working papers cannot, for legal or other reasons, be passed from a third country to the group auditor, the documentation retained by the group auditor shall include—

• (a) evidence that he, she or it has undertaken the appropriate procedures in order to gain access to the audit documentation, and

• (b) in the case of an impediment other than a legal one arising from legislation of the third country or countries concerned, evidence supporting the existence of such an impediment.

Additional report to audit committee

Auditors’ reporting obligations under Article 12 of Regulation (EU) No 537/2014

• (a) Regulation 52 of the European Union (Capital Requirements) Regulations 2014 ( S.I. No. 158 of 2014 ),

• (b) Regulation 78 of the European Union (Insurance and Reinsurance) Regulations 2015 ( S.I. No. 485 of 2015 ), or

• (c) Regulation 134(1) of, or Schedule 16 to, the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011 ( S.I. No. 352 of 2011 ).

Chapter 5 Record keeping

Record keeping

• (2) Where a transaction, act or operation is the subject of an investigation, inquiry, claim, assessment, appeal or proceeding which has already commenced within that 6 year period, then the relevant documents and information must be retained until such time as the investigation, inquiry, claim, assessment, appeal or proceeding has been concluded or for a period of at least 6 years, whichever is the longer.

Chapter 6 Objectivity

Future viability

PART 6 PUBLIC REGISTER

Public register

• (a) statutory auditors and audit firms (other than audit firms which fall within paragraph (b) of the definition of “statutory audit firm”),

• (b) third-country auditors and audit entities, and

• (c) audit firms approved in another Member State which have been registered in accordance with Regulation 38.

• (2) The public register referred to in Regulation 63 of the 2010 Audits Regulations, as that register was in being immediately before 17 June 2016, shall, on and from that date, be deemed to be the public register referred to in paragraph (1), and the other provisions of these Regulations (including provisions relating to the removal or alteration of entries in the public register) shall apply to that register accordingly.

Notification of information to Registrar of Companies

• (b) A Member State audit firm shall, as soon as may be after it is registered in accordance with Regulation 38, notify the relevant information to the recognised accountancy body.

• (c) A third-country auditor shall, as soon as may be after he or she is approved under these Regulations as a statutory auditor, notify the relevant information to the recognised accountancy body.

• (2) On receipt of a notification under paragraph (1) and its having carried out any verification of the information as seems to it to be necessary, the recognised accountancy body or the Supervisory Authority, as appropriate, shall notify to the Registrar of Companies—

• (a) the relevant information contained in the notification, and

(b)(i) subject to clause (ii), the individual identification number assigned by it to the auditor, audit firm or third-country auditor under Regulation 37(7) or a Member State audit firm under Regulation 38, and

• (ii) where—

• (I) under Regulations 37(7) or 38 such a number exists, and

• (II) by reason of the circumstances referred to in paragraph (b) of the definition of “relevant information” in paragraph (4), the relevant information notified to the recognised accountancy body or Supervisory Authority does not include that number,

the number referred to in paragraph 1(c)(ii) or 2(g) of Schedule 2.

• (3) The notifications under paragraph (1) and (2) shall each be made in such form and manner as the Registrar of Companies specifies.

• (4) In this Regulation, “relevant information” means the information set out in paragraph 1 or 2, as the case may be, of Schedule 2, other than that set out—

• (a) in subparagraph (b) of that paragraph 1 or 2, or

• (b) if, due to the simultaneous registration of a statutory audit firm and the statutory auditors that comprise that firm, the number there referred to is not available at that time, in subparagraph (c)(ii) of that paragraph 1 or subparagraph (g) of that paragraph 2.

• (5) For the avoidance of doubt, in the event that a recognised accountancy body is no longer recognised by the Supervisory Authority for the purposes of these Regulations or otherwise ceases to exist, the notifications under paragraphs (1) and (2) shall cease to have effect and the Registrar of Companies shall remove all information contained in such notifications from the public register.

Prohibition on certain acts unless registered

• (a) act as, or

• (b) represent himself, herself or itself, or hold himself, herself or itself out, as being,

a person falling within a category of person entered, or entitled to be entered, in the public register unless the person is entitled to be entered, and the name of the person is duly entered, in the public register.

• (2) A person who contravenes paragraph (1) shall be guilty of an offence and shall be liable—

• (a) on summary conviction, to a class A fine, or

• (b) on conviction on indictment, to a fine not exceeding €50,000.

Obligation of statutory auditor or audit firm to notify certain information

• (2) On receipt of a notification under paragraph (1) and its having carried out any verification of the information stated to have changed as seems to it to be necessary, the recognised accountancy body shall notify the change in information to the Registrar of Companies without undue delay.

• (3) The Registrar of Companies shall, as soon as may be but not later than one month after receipt of the notification referred to in paragraph (2), amend the public register to reflect the change of information so notified.

• (4) A person who fails, without reasonable excuse, to comply with paragraph (1) shall be guilty of an offence and shall be liable, on summary conviction, to a class A fine.

Information must be signed

• (2) The signature referred to in paragraph (1) may be an electronic signature (as defined in point 1 of Article 2 of Directive 1999/93/EC⁹ of the European Parliament and of the Council of 13 December 1999 on a Community framework for electronic signatures) if the provision of a signature in that form complies with any requirements in that behalf of the Registrar of Companies of the kind referred to in section 13(2)(a) of the Electronic Commerce Act 2000 (No. 27 of 2000).

• (3) If information is notified under Regulation 85(1) or 87(1) without being signed as required by paragraph (1), the statutory auditor or audit firm concerned shall be guilty of an offence and shall be liable, on summary conviction, to a class A fine.

Removal of third-country auditor or audit entity registered in accordance with Regulation 135 from public register

• (a) the auditor or audit entity does not provide all the information or clarifications necessary for the renewal of his, her or its registration or does not pay the appropriate fee under Regulation 140, or

• (b) the outcome of a quality assurance inspection or investigation and disciplinary process requires it.

• (2) A third-country auditor or audit entity the subject of a quality assurance inspection or investigation shall not be removed from the public register until the completion of that inspection or investigation.

• (3) The Supervisory Authority shall not give an instruction under paragraph (1) unless it has first given the third-country auditor or audit entity concerned a reasonable opportunity of being heard on the grounds (which the Supervisory Authority shall make known to such auditor or entity) that the Supervisory Authority is minded to give such instruction.

• (4) The Supervisory Authority shall, at such times as it thinks it appropriate to do so, issue guidelines with regard to what constitutes a reasonable opportunity referred to in paragraph (3).

• (5) The Supervisory Authority may publish on its website the name of the third-country auditor or audit entity that has been removed from the public register in accordance with this Regulation along with the reasons for removal.

Language of information to be entered in public register

PART 7 INDEPENDENCE

Requirement for independence — general

• (a) the statutory auditor or audit firm, as the case may be,

• (b) in the latter case, any statutory auditor of the statutory audit firm, and

• (c) any individual in a position to directly or indirectly influence the outcome of the statutory audit,

shall be independent of, and not involved in the decision-taking of, the audited entity.

• (2) During the period in which a statutory audit is being carried out, a statutory auditor or audit firm, as the case may be, shall take all reasonable steps to ensure that his, her or its independence is not affected by—

• (a) any existing or potential conflict of interest, or

• (b) any business or other direct or indirect relationship,

involving the statutory auditor or audit firm carrying out the statutory audit.

• (3) Paragraph (2) also applies, with any necessary modifications, to—

• (a) the network of the statutory auditor or audit firm,

• (b) the managers, auditors, employees or any other individuals whose services are placed at the disposal or under the control of the statutory auditor or audit firm,

• (c) any person directly or indirectly linked to the statutory auditor or audit firm by control, and

• (d) managers, auditors, employees or any other individuals whose services are placed at the disposal or under the control of a person linked to the statutory auditor or audit firm by control.

• (4) The obligations referred to in paragraphs (1) and (2) shall be required at least during both the period covered by the financial statements to be audited and the period during which the statutory audit is carried out.

Professional scepticism

• (a) maintain professional scepticism throughout the audit,

• (b) maintain professional scepticism when reviewing management estimates relating to fair values, the impairment of assets, provisions, and future cash flow relevant to the audited entity’s ability to continue as a going concern, and

• (c) recognise the possibility of a material misstatement due to facts or behaviour indicating irregularities, including fraud or error, notwithstanding the statutory auditor’s or the audit firm’s past experience of the honesty and integrity of the audited entity’s management and of the persons charged with its governance.

• (2) For the purposes of this Regulation, “professional scepticism” means an attitude that includes a questioning mind, being alert to conditions which may indicate possible misstatement due to error or fraud, and a critical assessment of audit evidence.

Prohibited relationships — specific provisions to secure independence

• (a) the statutory auditor or audit firm or network to which he, she or it belongs or any individual in a position to influence the outcome of the statutory audit, and

• (b) the audited entity,

as a result of which an objective, reasonable and informed third party, taking into account the safeguards applied, would conclude that the statutory auditor’s or audit firm’s independence is compromised.

• (2) Without prejudice to the generality of paragraph (1), a person shall not act as a statutory auditor of an entity if he or she is—

• (a) an officer or servant of the entity,

• (b) a person who has been an officer or servant of the entity within a period in respect of which accounts would fall to be audited by the person if he or she were appointed auditor of the entity,

• (c) a parent, spouse, brother, sister or child of an officer of the entity,

• (d) a person who is a partner of or in the employment of an officer of the entity,

• (e) a person who is disqualified under this paragraph for appointment as auditor of a body corporate that is a subsidiary or holding company of the entity or a subsidiary of the entity’s holding entity, or would be so disqualified if the body corporate were a company, or

• (f) a person in whose name a share in the entity is registered, whether or not that person is the beneficial owner of the share.

• (3) Without prejudice to the generality of paragraphs (1) and (2), a statutory audit firm, regardless of its legal structure, shall not carry out a statutory audit of an entity if—

• (a) any principal of the audit firm is an officer or servant of the entity,

• (b) any principal of the audit firm has been an officer or servant of the entity within a period in respect of which accounts would fall to be audited by the firm if the firm was appointed auditor of the entity, or

• (c) the firm is disqualified under this paragraph for appointment as auditor of any other body corporate that is a subsidiary or holding company of the entity or a subsidiary of the entity’s holding company, or would be so disqualified if the body corporate were a company.

• (4) Without prejudice to the generality of paragraphs (1) to (3), a person shall not carry out a statutory audit of an entity on behalf of a statutory audit firm if he, or she or it is—

• (a) a person in whose name a share in the entity is registered, whether or not that person is the beneficial owner of the share, or

• (b) a parent, spouse, brother, sister or child of an officer of the entity.

Prohibited relationships — financial or beneficial interest

• (a) hold or have a material and direct beneficial interest in, or

• (b) engage in any transaction in any financial instrument issued, guaranteed, or otherwise supported by,

any audited entity within their area of statutory audit activities, other than interests owned indirectly through diversified collective investment schemes, including managed funds such as pension funds or life assurance.

• (2) A statutory auditor, an audit firm, the key audit partner of the audit firm, the employees of the statutory auditor or audit firm, and any other individual referred to in paragraph (1), shall not participate in or otherwise influence the outcome of a statutory audit of any particular audited entity if he, she or it—

• (a) owns financial instruments of the audited entity, other than interests owned indirectly through diversified collective investment schemes,

• (b) owns financial instruments of any entity related to the audited entity, the ownership of which may cause, or may be generally perceived as causing, a conflict of interest, other than interests owned indirectly through diversified collective investment schemes, or

• (c) has had an employment, or a business or other relationship with the audited entity within the period covered by the financial statements to be audited and the period during which the statutory audit is carried out that may cause, or may be generally perceived as causing, a conflict of interest.

• (3) A statutory auditor, an audit firm, the key audit partner of the audit firm, the employees of the statutory auditor or audit firm, and any other individual referred to in paragraph (1), shall not solicit or accept pecuniary or non-pecuniary gifts or favours from the audited entity or any entity related to an audited entity unless an objective, reasonable and informed third party would consider the value thereof as trivial or inconsequential.

Prohibited relationships — mergers and acquisitions

• (2) As soon as possible, and in any event within 3 months of the merger or acquisition referred to in paragraph (1), the statutory auditor or audit firm shall take all such steps as may be necessary to terminate any current interests or relationships that would compromise his, her or its independence and shall, where possible, adopt safeguards to minimise any threat to his, her or its independence arising from prior and current interests and relationships.

Threats to independence and other information to be recorded

Preparation for statutory audit and assessment of threats to independence

• (a) whether he, she or it complies with the requirements set out in Regulations 91 and 93 to 96;

• (b) whether there are threats to his, her or its independence and the safeguards applied to mitigate those threats;

• (c) whether he, she or it has the competent employees, time and resources needed in order to carry out the statutory audit in an appropriate manner;

• (d) whether, in the case of an audit firm, the key audit partner is approved as statutory auditor in the Member State requiring the statutory audit.

Internal organisation of statutory auditors and audit firms

• (a) the audit firm shall establish appropriate policies and procedures to ensure that no person, including any partner, director, member or shareholder of the audit firm or of a firm in its network, intervenes in the carrying out of a statutory audit in any way which jeopardises the independence and objectivity of the statutory auditor who carries out the statutory audit on behalf of the audit firm;

• (b) the statutory auditor or audit firm shall have sound administrative and accounting procedures, internal quality control mechanisms, effective procedures for risk assessment, and effective control and safeguard arrangements for information processing systems;

• (c) the statutory auditor or audit firm shall establish appropriate policies and procedures to ensure that his, her or its employees and any other individuals whose services are placed at his, her or its disposal or under his, her or its control, and who are directly involved in the statutory audit activities, have appropriate knowledge and experience for the duties assigned;

(d)(i) the statutory auditor or audit firm shall establish appropriate policies and procedures to ensure that outsourcing of important audit functions is not undertaken in such a way as to impair the quality of the statutory auditor’s or audit firm’s internal quality control and the ability of the competent authorities to supervise the statutory auditor’s or audit firm’s compliance with the obligations laid down in these Regulations and, where applicable, in Regulation (EU) No 537/2014;

• (ii) the statutory auditor or audit firm shall ensure that any such outsourcing of audit functions does not affect his, her or its responsibility towards the audited entity;

• (e) the statutory auditor or audit firm shall establish appropriate and effective organisational and administrative arrangements to prevent, identify, eliminate or manage and disclose any threats to his, her or its independence as referred to in Regulations 91, 93 to 97 and 103 and Regulation (EU) No 537/2014;

• (f) the statutory auditor or audit firm shall establish appropriate policies and procedures for carrying out statutory audits, coaching, supervising and reviewing employees’ activities and organising the structure of the audit file as referred to in Regulation 100;

• (g) the statutory auditor or audit firm shall establish an internal quality control system to ensure the quality of the statutory audit so that—

• (i) such system covers, at least, the policies and procedures referred to in subparagraph (f), and

• (ii) responsibility for such system lies with a person who is qualified as a statutory auditor;

• (h) the statutory auditor or audit firm shall use appropriate systems, resources and procedures to ensure continuity and regularity in the carrying out of his, her or its statutory audit activities;

• (i) the statutory auditor or audit firm shall also establish appropriate and effective organisational and administrative arrangements for dealing with and recording incidents which have, or may have, serious consequences for the integrity of his, her or its statutory audit activities;

• (j) the statutory auditor or audit firm shall have in place adequate remuneration policies, including profit-sharing policies, providing sufficient performance incentives to secure audit quality but the amount of revenue that the statutory auditor or audit firm derives from providing non-audit services to the audited entity shall not form part of the performance evaluation and remuneration of any person involved in, or able to influence the carrying out of, the audit;

• (k) the statutory auditor or audit firm shall monitor and evaluate the adequacy and effectiveness of his, her or its systems, internal quality control mechanisms and arrangements established in accordance with these Regulations and, where applicable, Regulation (EU) No 537/2014 and take appropriate measures to address any deficiencies;

• (l) the statutory auditor or audit firm shall—

• (i) carry out an annual evaluation of the internal quality control system referred to in subparagraph (g), and

• (ii) keep records of the findings of that evaluation and any proposed measure to modify the internal quality control system.

• (2) A statutory auditor or audit firm shall communicate, in writing, his, her or its policies and procedures referred to in paragraph (1) to the employees of the statutory auditor or audit firm.

• (3) A statutory auditor or the audit firm shall take into consideration the scale and complexity of his, her or its activities when complying with the requirements set out in paragraph (1).

• (4) A statutory auditor or audit firm shall be able to demonstrate to the recognised accountancy body or Supervisory Authority that the policies and procedures designed to achieve compliance with this Regulation are appropriate given the scale and complexity of activities of the statutory auditor or audit firm.

Organisation of work of statutory auditors and audit firms

• (2) An audit firm shall—

• (a) provide the key audit partner with sufficient resources and with personnel that have the necessary competence and capabilities to discharge his or her duties appropriately, and

• (b) ensure that the main criteria in selecting the key audit partner are securing audit quality, independence and competence.

• (3) A statutory auditor, when carrying out a statutory audit of an entity, shall devote sufficient time to the engagement and shall assign sufficient resources to enable him or her to carry out his or her duties appropriately.

• (4) A statutory auditor or audit firm shall keep records of any contraventions by him, her or it of the provisions of these Regulations and, where applicable, Regulation (EU) No 537/2014.

• (5) A statutory auditor or audit firm shall keep records of any consequences of any contravention referred to in paragraph (4), including the measures taken to address such contravention and to modify his, her or its internal quality control system.

• (6) A statutory auditor or audit firm shall prepare an annual report containing an overview of any measures taken pursuant to paragraph (5) and, in the case of an audit firm, shall communicate that report internally to the partners or directors, as may be appropriate, of the audit firm.

• (7) A statutory auditor or audit firm shall document each request made and advices received where he, she or it asks external experts for advice.

Organisation of work of statutory auditors and audit firms — audit files

• (a) the name, address and place of business;

• (b) in the case of an audit firm, the names of the key audit partner;

• (c) the fees charged for the statutory audit and the fees charged for other services in any financial year.

• (2) A statutory auditor or audit firm shall create an audit file for each statutory audit which shall be closed not later than 60 days after the date of signature of the statutory auditors’ report concerned and, where applicable, the reports referred to in Articles 10 and 11 of Regulation (EU) No 537/2014.

• (3) A statutory auditor or audit firm shall document and retain at least the data recorded pursuant to Regulation 96, and, where applicable, Articles 6 to 8 of Regulation (EU) No 537/2014 for a period of at least 6 years.

• (4) A statutory auditor or audit firm shall retain any other data and documents that are of importance in support of the statutory auditors’ report and, where applicable, the reports referred to in Articles 10 and 11 of Regulation (EU) No 537/2014 and for monitoring compliance with these Regulations and other applicable legal requirements.

• (5) A statutory auditor or audit firm shall keep records of any complaints made in writing about the performance of the statutory audits carried out by him, her or it.

Restrictions with regard to fees

• (a) are not to be influenced by, or determined by, the provision of additional services to the audited entity, and

• (b) are not to be based on any form of contingency.

Rotation of key audit partner in cases of public-interest entities

Moratorium on taking up certain positions in audited entities

• (a) a statutory auditor who carries out a statutory audit of an entity, or

• (b) the key audit partner who carries out, on behalf of an audit firm, a statutory audit of an entity,

any of the positions in that entity, specified in paragraph (2), before a period of at least one year has elapsed since the day following the end of his or her direct involvement as a statutory auditor or key audit partner from the audit engagement.

• (2) The specified positions are—

• (a) a key management position in the audited entity,

• (b) a position on the audit committee, or where such committee does not exist, such body as performs the equivalent functions to the audit committee, of the audited entity, or

• (c) a non-executive member position of the audited entity or a member’s position of that entity.

• (3) There shall not be taken up by—

• (a) a statutory auditor who carries out a statutory audit of a public-interest entity, or

• (b) the key audit partner who carries out, on behalf of an audit firm, a statutory audit of a public-interest entity,

any of the positions in that entity, specified in paragraph (4), before a period of at least 2 years has elapsed since the day following the end of his or her direct involvement as a statutory auditor or key audit partner from the audit engagement.

• (4) The specified positions are—

• (a) a key management position in the audited entity,

• (b) a position on the audit committee, or where such committee does not exist, such body as performs the equivalent functions to the audit committee, of the audited entity, or

• (c) a non-executive member position of the audited entity or a member’s position of that entity.

• (5) Where an employee or partner, other than the key audit partner, of a statutory auditor or audit firm, or any other individual whose services are placed at the disposal or under the control of the statutory auditor or audit firm, and when such employees, partners or other individuals are personally approved as statutory auditors, there shall not be taken up by those employees, partners or other individuals any of the positions referred to in paragraphs (2) and (4), before a period of at least one year has elapsed since the day following (should such occur) his or her involvement in the statutory audit engagement of that audited entity.

Rotation of statutory auditor and audit firms in case of public-interest entities — extension

• (2) The grounds for the exceptional basis may be events in the nature of mergers, acquisitions and special investigations but, in any case, it will be a matter for the Supervisory Authority to determine such grounds.

• (3) A request shall be made in such form and manner as the Supervisory Authority specifies.

• (4) On receipt of a request in the form specified in paragraph (3), the Supervisory Authority shall—

• (a) grant the extension as requested,

• (b) grant a shorter extension than that requested, or

• (c) refuse to grant the extension.

• (5) Where the Supervisory Authority, on receipt of a request for an extension, considers that it requires additional information before making a decision under paragraph (4), it shall give notice of that to the public-interest entity that made the request.

• (6) The notice referred to in paragraph (5) shall set out the additional information required by the Supervisory Authority.

• (7) On receipt of a response to the notice from the public-interest entity containing the additional information referred to in paragraph (5), the Supervisory Authority shall—

• (a) grant the extension as requested,

• (b) grant a shorter extension than that requested, or

• (c) refuse to grant the extension.

• (8) Where the Supervisory Authority grants an extension under paragraph (4) or (5), it shall—

• (a) do so on an exceptional and case by case basis only, and

• (b) publish its decision on its website.

• (9) Where the Supervisory Authority refuses to grant an extension under paragraph (4)(c) or (7)(c), it shall provide reasons for its decision to the public-interest entity.

Rotation — reports by statutory auditor and audit firm in case of public-interest entities

• (2) The report to the Supervisory Authority referred to at Article 17(8) of Regulation (EU) No 537/2014 shall be made in such form and manner as the Supervisory Authority specifies.

• (3) On receipt of a report in the form specified in paragraph (2), the Supervisory Authority shall have the power to—

• (a) determine the relevant date for the purposes of paragraph (1), or

• (b) request additional information from the statutory auditor or audit firm before making a decision referred to in subparagraph (a).

• (4) Where the Supervisory Authority, on receipt of a report, considers that it requires additional information from the statutory auditor or audit firm or public-interest entity before making a decision under paragraph (3)(a), it shall—

• (a) give notice of that to the statutory auditor or audit firm or public-interest entity within 2 weeks after the receipt of the report, and

• (b) set out, in the notice, the additional information required by the Supervisory Authority.

• (5) On receipt of a response to the notice from the statutory auditor or audit firm or public-interest entity containing the additional information referred to in paragraph (4), the Supervisory Authority shall—

• (a) determine the relevant date for the purposes of paragraph (1), and

• (b) provide reasons for its decision to the statutory auditor or audit firm and public-interest entity.

Provision of certain prohibited non-audit services by auditors of public-interest entities

• (a) tax services relating to—

• (i) preparation of tax forms,

• (ii) identification of public subsidies and tax incentives unless support from the statutory auditor or audit firm in respect of such services is required by law,

• (iii) support regarding tax inspections by tax authorities unless support from the statutory auditor or audit firm in respect of such inspections is required by law,

• (iv) calculation of direct and indirect tax and deferred tax, or

• (v) provision of tax advice;

• (b) valuation services, including valuations performed in connection with actuarial services or litigation support services.

• (2) The non-audit services referred to in paragraph (1) may only be provided as specified in that paragraph if—

• (a) they have no direct or have immaterial effect, separately or in the aggregate, on the audited financial statements,

• (b) the estimation of the effect on the audited financial statements is comprehensively documented and explained in the additional report to the audit committee, and

• (c) the principles of independence set out in these Regulations are complied with by the statutory auditor or audit firm.

• (3) The audit committee shall, at such times as it thinks it appropriate to do so, issue guidelines with regard to the non-audit services referred to in paragraph (1).

PART 8 QUALITY ASSURANCE OF STATUTORY AUDITORS AND AUDIT FIRMS

Chapter 1 Quality Assurance

Quality assurance by Supervisory Authority of statutory audit of public-interest entities and third-country auditors, etc.

• (2) The Supervisory Authority shall ensure that it has in place a quality assurance system of registered third-country auditors and audit entities to whom these Regulations or Regulation (EU) No 537/2014 applies.

• (3) Regulations 108 to 110 shall not apply to the statutory audit of annual and consolidated financial statements of public-interest entities unless specified in Regulation (EU) No 537/2014.

• (4) The Supervisory Authority may publish on its website the findings and conclusions of individual inspections undertaken as part of the quality assurance system referred to in paragraph (1).

System of quality assurance to be put in place

• (2) A recognised accountancy body shall ensure that it has in place a system of quality assurance of—

• (a) the body’s members’ activities as statutory auditors and audit firms of entities not referred to in Regulation 107 (1) and (2), and

• (b) the activities, as statutory auditors and audit firms, of persons who, though not members of the recognised accountancy body, are persons in relation to whom the body may perform functions under these Regulations.

Organisation of quality assurance system

• (a) the system is independent of the reviewed statutory auditors and audit firms,

• (b) the funding for the system is secure and free from any possible undue influence by statutory auditors or audit firms,

• (c) the system has adequate resources,

• (d) the persons who carry out quality assurance reviews have appropriate professional education and relevant experience in statutory audit and financial reporting combined with specific training on quality assurance reviews,

• (e) the selection of reviewers for specific quality assurance review assignments is effected in accordance with an objective procedure designed to ensure that there are no conflicts of interest between reviewers and the statutory auditor or audit firm under review,

• (f) the scope of quality assurance reviews of audits, supported by adequate testing of selected audit files, includes, except where otherwise agreed with the Supervisory Authority, an assessment of—

• (i) compliance with applicable auditing standards and independence requirements,

• (ii) the quantity and quality of resources spent,

• (iii) the audit fees charged, and

• (iv) the internal quality control system of the audit firm,

• (g) each quality assurance review is the subject of a report in writing which includes the main conclusions of the review,

• (h) a quality assurance review of each statutory auditor or audit firm takes place on the basis of an analysis of risk, at least, subject to paragraph (5) and Regulation 110, every 6 years,

• (i) statutory auditors and audit firms take all reasonable steps to ensure that recommendations arising from quality assurance reviews of them are implemented within a reasonable period,

• (j) there is published annually by it the overall results of quality assurance reviews carried out by it in the year concerned, and

• (k) quality assurance reviews are appropriate and proportionate in view of the scale and complexity of the activity of the reviewed statutory auditor or audit firm.

• (2) For the purpose of paragraph (1)(e), at least the following criteria shall apply to the selection of reviewers:

• (a) reviewers have appropriate professional education and relevant experience in statutory audit and financial reporting combined with specific training on quality assurance reviews;

• (b) a person does not act as a reviewer in a quality assurance review of a statutory auditor or audit firm until at least 3 years have elapsed since that person ceased to be a partner or an employee of, or otherwise associated with, that statutory auditor or audit firm;

• (c) reviewers must declare (if such be the case) that there are no conflicts of interest between them and the statutory auditor and the audit firm to be reviewed.

• (3) For the purpose of paragraph (1)(k), a recognised accountancy body, when undertaking quality assurance reviews of the statutory audits of annual or consolidated financial statements of medium-sized or small undertakings, shall take account of the fact that auditing standards adopted in accordance with Article 26 of the Audit Directive are designed to be applied in a manner that is proportionate to the scale and complexity of the business of the audited entity.

• (4) If a statutory auditor or audit firm fails to take all reasonable steps to ensure that recommendations arising from a quality assurance review of him, her or it are implemented within a reasonable period, the recognised accountancy body concerned shall take appropriate action, including, where applicable, subjecting the statutory auditor or audit firm, as the case may be, to the system of disciplinary actions or penalties referred to in these Regulations.

• (5) The period of at least 6 years referred to in paragraph (1)(h) shall be a continuation of the system that was in place under the 2010 Audit Regulations when the first quality assurance reviews were required to be completed within 6 years of the date of the making of those Regulations.

Quality assurance review deemed to include individual auditors in certain cases

Right of recognised accountancy body as regards professional discipline

Chapter 2 Investigations and Sanctions

System of investigation and penalties

Duty of each recognised accountancy body with regard to sanctions

• (2) The contractual and other arrangements referred to in paragraph (1) shall comply with the requirements of procedural fairness.

• (3) By virtue of this Regulation, the contractual and other arrangements referred to in paragraph (1) that subsist for the time being between a recognised accountancy body and its members shall operate and have effect so as to enable the imposition by the recognised accountancy body—

• (a) of penalties of a like character to those, and

• (b) in the cases,

referred to in that paragraph in respect of persons who, though not members of the recognised accountancy body, are persons in relation to whom it may, by virtue of Regulation 35, perform functions under these Regulations.

Scope of penalties and publicity in relation to their imposition

• (2) Paragraph (1) is without prejudice to Regulations 52 and 53.

• (3) Unless there do not exist internal appeal procedures of a recognised accountancy body as referred to in Regulation 52(9)(a) or 53(9)(a), the reference in paragraph (4) to a recognised accountancy body shall be read as a reference to a recognised accountancy body acting through the disciplinary committee that deals with matters at first instance.

• (4) Without prejudice to Regulation 35(9) to (11), a recognised accountancy body may, save where, in its opinion, proceeding in this manner would not be in the public interest, adopt procedures analogous to those in Regulation 52(5) to (7) or 53(5) to (7) as regards affording the statutory auditor or audit firm an opportunity to rectify the matters that have occasioned the investigation concerned and the proposed exercise of the power of withdrawal of approval referred to in paragraph (1).

• (5) If—

• (a) there exist internal appeal procedures, as referred to in Regulation 52(9)(a) or 53(9)(a), of a recognised accountancy body, and

• (b) the investigation and disciplinary procedures of the recognised accountancy body provide that a decision of its disciplinary committee referred to in paragraph (3), being a decision of a nature to which this Regulation applies, shall stand suspended or shall not take effect until, as the case may be—

• (i) the period for making an appeal under those procedures has expired without such an appeal having been made,

• (ii) such an appeal has been made and the decision to withdraw the approval confirmed, or

• (iii) such an appeal that has been made is withdrawn,

then, notwithstanding anything in the preceding provisions of this Regulation, the operation of the withdrawal of approval by that disciplinary committee shall stand suspended until the happening of an event specified in subparagraph (b)(i), (ii) or (iii).

• (6) If—

• (a) there exist internal appeal procedures, as referred to in Regulation 52(9)(a) or 53(9)(a), of a recognised accountancy body, and

• (b) the investigation and disciplinary procedures of the recognised accountancy body do not provide, as referred to in paragraph (5)(b), for the decision of the disciplinary committee referred to in that provision to stand suspended or not to take effect,

then, notwithstanding anything in those procedures, the auditor or audit firm to whom that decision relates may apply to the High Court for an order suspending the operation of the withdrawal pending the determination by the relevant appellate committee of an appeal that he, she or it is making under those internal appeal procedures.

• (7) Where an application under paragraph (6) is made to the High Court, paragraphs (10) to (13) apply to the application with—

• (a) the substitution of references to an appeal under those internal appeal procedures for references to an appeal under Regulation 54,

and

• (b) any other necessary modifications.

• (8) If the relevant appellate committee referred to in paragraph (6) is of the opinion, having regard to the particular issues that have arisen on that appeal, that, in the interests of justice, the disposal by it of an appeal referred to in that paragraph ought to include procedures analogous to those, as referred to in paragraph (4), provided by Regulation 52(5) to (7) or 53(5) to (7) being adopted by it, then, in disposing of that appeal, it shall adopt procedures analogous to those in Regulation 52(5) to (7) or 53(5) to (7).

• (9) A recognised accountancy body shall take all reasonable steps to ensure that any appeal to the relevant appellate committee referred to in paragraph (6) is prosecuted promptly and it shall be the duty of that appellate committee to ensure that any such appeal to it is disposed of as expeditiously as may be and, for that purpose, to take all such steps as are open to it to ensure that, in so far as is practicable, there are no avoidable delays at any stage in the determination of such an appeal.

• (10) Where a recognised accountancy body has made a decision to withdraw the approval of an auditor or audit firm under this Regulation (that is to say, a final decision of the recognised accountancy body on the matter after the internal appeal procedures (if any) of it have been employed and exhausted), the auditor or audit firm may apply to the High Court for an order suspending the operation of the withdrawal pending the determination by the High Court of an appeal under Regulation 54 that he, she or it is making against the withdrawal.

• (11) Subject to paragraph (13), on the hearing of an application under paragraph (10), the High Court may, as it considers appropriate and having heard the recognised accountancy body concerned and, if it wishes to be so heard, the Supervisory Authority (which shall have standing to appear and be heard on the application)—

• (a) grant an order suspending the operation of the withdrawal, or

• (b) refuse to grant such an order,

and an order under subparagaraph (a) may provide that the order shall not have effect unless one or more conditions specified in the order are complied with (and such conditions may include conditions requiring the auditor or audit firm not to carry out statutory audits save under the supervision of one or more other statutory auditors or audit firms or not to carry out such audits save in specified circumstances).

• (12) Subject to paragraph (13), the High Court may, on application to it by the auditor or audit firm or recognised accountancy body concerned, vary or discharge an order under paragraph (11)(a) if it considers it just to do so.

• (13) In considering an application under paragraph (10) or (12), the High Court shall have regard to—

• (a) whether, as regards the appeal the applicant is making under Regulation 54 to the High Court, the applicant has a strong case that is likely to succeed before that Court (and, for that purpose, the High Court shall require the applicant to give an indication of the facts that will be relied upon, or of the evidence that will be adduced in the case of facts that are in controversy, by him, her or it on the hearing of that appeal), and

• (b) the public interest and, in particular, the public interest in ensuring that there is the minimum of disruption, consistent with law, to the discharge by the recognised accountancy body concerned, as a body assigned with the function of granting and withdrawing approval.

• (14) The fact of one or more—

• (a) measures having been taken against, or

• (b) one or more penalties having been imposed on,

a statutory auditor or audit firm by a recognised accountancy body shall be disclosed by the recognised accountancy body to the public and that disclosure shall, if the recognised accountancy body considers it appropriate, include such further particulars with respect to the matter as it thinks fit.

• (15) Subject to paragraph (16), the manner of such disclosure, and the time at which it is made, shall be such as the recognised accountancy body determines to be appropriate.

• (16) The recognised accountancy body shall establish, in writing, criteria the purpose of which is to govern the determination by it of the matters referred to in paragraph (15); and those criteria shall require the prior approval of the Supervisory Authority.

PART 9 AUDIT COMMITTEES

Audit committees for public-interest entities

• (2) The majority of the members of the audit committee shall be non-executive directors of the public-interest entity, that is to say, directors—

• (a) the terms of appointment of whom indicate or state that they are being appointed in a non-executive capacity, and

• (b) who otherwise possess the requisite degree of independence (particularly with regard to each of them satisfying the condition in paragraph (3)) so as to be able to contribute effectively to the committee’s functions.

• (3) The condition referred to in paragraph (2)(b) is that the director does not have, and at no time during the period of 3 years preceding his or her appointment to the committee did have—

• (a) a material business relationship with the public-interest entity, either directly, or as a partner, shareholder, director (other than as a non-executive director) or senior employee of a body that has such a relationship with the entity, or

• (b) a position of employment in the public-interest entity.

• (4) At least one of the directors referred to in paragraph (2) shall be a person who has competence in accounting or auditing.

• (5) For the purposes of paragraphs (2) and (3)(a), a non-executive director is a director who is not engaged in the daily management of the public-interest entity or body concerned, as the case may be.

• (6) The members of the audit committee as a whole shall have competence relevant to the sector in which the audited entity is operating.

• (7) The chairman of the audit committee shall be appointed by its members and shall be independent of the audited entity.

• (8) Any proposal of the directors of a public-interest entity with respect to the appointment of a statutory auditor or audit firm to the entity shall be based on a recommendation made to the directors by the audit committee.

• (9) The statutory auditor or audit firm shall report to the audit committee of the public-interest entity on key matters arising from the statutory audit of the entity, and, in particular, on material weaknesses in internal control in relation to the financial reporting process.

• (10) Without prejudice to paragraph (1), this Regulation shall not apply to a public-interest entity if it is—

• (a) a public-interest entity which is a subsidiary undertaking within the meaning of point 10 of Article 2 of Directive 2013/34/EU if that entity fulfils the requirements set out in paragraphs (1) and (2) and Articles 11(1) and (2) and 16(5) of Regulation (EU) No 537/2014 at group level,

• (b) any public-interest entity which is an UCITS as defined in Article 1(2) of Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009¹¹ on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) or an alternative investment fund (AIF) as defined in Article 4(1)(a) of Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011¹² on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010,

• (c) subject to paragraph (11), any public-interest entity the sole business of which is to act as an issuer of asset backed securities as defined in point 5 of Article 2 of Commission Regulation (EC) No 809/2004 of 29 April 2004¹³ implementing Directive 2003/71/EC of the European Parliament and of the Council as regards information contained in prospectuses as well as the format, incorporation by reference and publication of such prospectuses and dissemination of advertisements, or

• (d) any credit institution within the meaning of point 1 of Article 3(1) of Directive 2013/36/EU whose shares are not admitted to trading on a regulated market of any Member State within the meaning of point 14 of Article 4(1) of Directive 2004/39/EC and which has, in a continuous or repeated manner, issued only debt securities admitted to trading in a regulated market, provided that the total nominal amount of all such debt securities remains below €100,000,000 and that it has not published a prospectus under Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003¹⁴ on the prospectus to be published when securities are offered to the public or admitted to trading and amending Directive 2001/34/EC.

• (11) An entity that avails itself of the exemption under paragraph (10)(c) shall, by means of a statement to that effect included—

• (a) in any annual report published by it, or

• (b) in an annual return or other periodic statement delivered by it to the Registrar of Companies or Central Bank of Ireland,

set forth the reasons for why it considers the establishment of an audit committee by it is not appropriate and, accordingly, why it has availed itself of that exemption.

• (12) Without prejudice to the responsibility of the directors of the public-interest entity, the responsibilities of the audit committee shall include—

• (a) to inform directors of the entity of the outcome of the statutory audit and explain how the statutory audit contributed to the integrity of financial reporting and what the role of the audit committee was in that process,

• (b) to monitor the financial reporting process and submit recommendations or proposals to the directors of the entity to ensure its integrity,

• (c) to monitor the effectiveness of the entity’s internal quality control and risk management systems and, where applicable, its internal audit, regarding the financial reporting of the entity, without breaching its independence,

• (d) to monitor the statutory audit of the annual and consolidated financial statements, in particular, its performance, taking into account any findings and conclusions by the Supervisory Authority pursuant to Article 26(6) of Regulation (EU) No 537/2014,

• (e) to review and monitor the independence of the statutory auditors or the audit firms in accordance with Regulations 93 to 98 and Article 6 of Regulation (EU) No 537/2014, and, in particular, the appropriateness of the provision of non-audit services to the audited entity in accordance with Article 5 of that Regulation, and

• (f) to be responsible for the procedure for the selection of a statutory auditor or audit firm and recommend the statutory auditor or audit firm to be appointed in accordance with Article 16 of Regulation (EU) No 537/2014 except when Article 16(8) of that Regulation is applied.

• (13) Paragraph (8) applies to a proposal of the directors (with respect to the appointment of a statutory auditor or audit firm to a public-interest entity) made at any time after the establishment of the audit committee in respect of the entity.

• (14) The other provisions of these Regulations with regard to the performance of a function by the audit committee apply with respect to accounts of the public-interest entity for financial years beginning on or after the establishment of the audit committee in respect of the entity.

• (15) A public-interest entity which, without reasonable excuse, contravenes paragraph (11) shall be guilty of an offence and shall be liable—

• (a) on summary conviction, to a class A fine, or

• (b) on conviction on indictment, to a fine not exceeding €12,500.

PART 10 REGULATORY ARRANGEMENTS BETWEEN MEMBER STATES

Chapter 1 Cooperation with other Member States

Specific requirements with regard to cooperation

• (2) The Supervisory Authority, the recognised accountancy bodies and the Registrar of Companies with functions relating to approval, registration, quality assurance, inspection and discipline under these Regulations or Regulation (EU) No 537/2014, shall cooperate with the counterpart authorities in other Member States and the relevant European Supervisory Authorities whenever necessary for the purpose of those authorities or bodies (or, as the case may be, the counterpart authorities) carrying out their respective functions under these Regulations or Regulation (EU) No 537/2014 or, as the case may be, the laws of the other Member State concerned that implement the Audit Directive.

• (3) The Supervisory Authority, the recognised accountancy bodies and the Registrar of Companies with the foregoing functions under these Regulations or Regulation (EU) No 537/2014 shall render assistance to the counterpart authorities in other Member States and to the relevant European Supervisory Authorities and, in particular, shall exchange information and cooperate with them in investigations relating to the carrying out of statutory audits.

Confidentiality of information

• (a) is obtained in performing functions under any provision of these Regulations or of Regulation (EU) No 537/2014, and

• (b) has not otherwise come to the notice of members of the public.

• (2) A person who contravenes paragraph (1) shall be guilty of an offence and shall be liable—

• (a) on summary conviction, to a class A fine, or

• (b) on conviction on indictment, to a fine not exceeding €12,500 or imprisonment for a term not exceeding 12 months or both.

Supplemental provisions in relation to Regulation 117

• (a) a member or director or former member or director of any board or committee, howsoever called, of the Supervisory Authority, the recognised accountancy bodies or the Registrar of Companies;

• (b) an employee or former employee of the Supervisory Authority, the recognised accountancy bodies or the Registrar of Companies;

• (c) a professional or other advisor to the Supervisory Authority, the recognised accountancy bodies or the Registrar of Companies, including a former advisor.

Obligation to supply information required for certain purposes and saving concerning confidential information

• (2) Regulation 117 shall not prevent the Supervisory Authority or a recognised accountancy body from complying with any such request or exchanging confidential information.

Obligation of Supervisory Authority or recognised accountancy body to gather information