International audit firm Mazars, represented locally by Mazars Malta, have published a guidebook to the European audit reform.

The publication explains the objectives and implications of the European Audit Reform, which aims to address concerns about audits raised in the wake of the 2008 financial crisis. The reform is reflected in new legislation which came into force in June. EU member states have two-years in which to implement the relevant directive and regulation.

The reform places a strong emphasis on reinforced governance by increasing the role of the audit committee and introducing a fair and transparent tendering process for the selection of the auditor(s); a more elaborated audit report, with the requirement of additional reports; a system of mandatory rotation of audit firms; a list of prohibited non-audit services and a threshold on permitted non-audit services provided by the audit firm; and finally, the creation of a Committee of European Auditing Oversight Bodies to oversee the cooperation between national audit oversight bodies.

“If one had to consider the implications of this audit reform from a local perspective, it is very clear that stakeholders will be affected in different ways. Public interest entities (PIEs) such as banks, insurance companies and listed companies, will need to reinforce their corporate governance structures, while both auditors and PIEs will need to deal with the requirements relating to the introduction of audit rotation and the provision of non-audit services. This implies that local stakeholders cannot sit back and wait but should rather start gearing up to meet future challenges and opportunities,” Mazars Malta partner Paul Giglio said.

The guidebook is available for download at www.mazars.com/Home/News/Latest-News3/Guidebook-to-the-European-Audit-Reform.