Audit
ESMA’s activities in the audit area contribute to the improvement of audit quality and consequently to investors’ and the broader public’s confidence and trust financial reporting in the EU.
Audit Directive and Regulation
The amended Audit Directive (2014/56/EU) and Audit Regulation (537/2014/EU) introduced stricter requirements on the statutory audits of public-interest entities, such as listed companies, credit institutions, and insurance undertakings. The objective of these changes is to reduce risks of excessive familiarity between statutory auditors and their clients, encourage professional scepticism and limit conflicts of interest.
The Audit Regulation also establishes the foundations for cooperation among audit oversight bodies in the EU as well as with the European supervisory authorities (ESAs) within the Committee of European Auditing Oversight Bodies (CEAOB), in which ESMA is a member without voting rights.
Committee of European Auditors’ Oversight Bodies (CEAOB)
The CEAOB's main objectives are to foster convergence of practice by European audit regulators and the improvement of audit quality in order to further trust in informative, reliable, and independent audit reports.
Through its contribution in the CEAOB, ESMA provides securities regulators’ perspectives and contributes to the implementation and consistent application of the statutory audit rules, the technical examination of international auditing standards (ISAs) and the monitoring of the market quality and competition in the provision of statutory audit services to public interest entities.
A significant part of the work performed within the CEAOB comes from its five sub-groups. ESMA chairs the CEAOB subgroup which is responsible for the technical assessment of third country audit regulatory frameworks and the cooperation between EU and third countries’ audit oversight authorities. Technical assessments of third country audit regulatory framework facilitates cooperation with third country regulators up to high audit regulatory standards. The subgroup also supports CEAOB members in their interactions with third country audit oversight bodies.
Other ESMA activities to promote audit quality
In order to enhance the quality and uniformity of practice in the global auditing and assurance profession, ESMA also provides comment letters to the International Auditing and Assurance Standards Board (IAASB), expressing European securities regulators’ views on enhancing investor protection and improving listed entities’ auditors’ reports.