Relations with Third Countries
Third Country Auditors
The Audit Directive requires the registration and regulation of auditors that audit the accounts of companies from outside the EEA, which issue securities on regulated markets in the EEA ("third country auditors").
On 19 January 2011, the European Commission issued a Decision (2011/30/EU) on the equivalence of certain third country public oversight, quality assurance and, investigation and penalty system for auditors and audit entities and a transitional period for audit activities of certain third country auditors and audit entities in the EU. Further details are available on the Commission website.
The Government has now made regulations to implement the Commission Decision by amending the Statutory Auditors and Third Country Auditors Regulations 2007 (SI 2007/3494) and Part 42 of, and Schedule 10 to, the Companies Act 2006 via regulations under section 2(2) of the European Communities Act 1972. The Statutory Auditors and Third Country Auditors (Amendment) Regulations 2011 (SI 2011/1856) are available on the Companies Act 2006 Regulations and Commencement Orders page
The Department for Business, Innovation and Skills issued draft regulations implementing the Decision, in relation to third country auditors registered or domiciled outside the EEA, for comment for a period beginning on Thursday 7 April 2011 and ending on Thursday 19 May 2011.
Explanatory Text - Draft Statutory Auditors and Third Country Auditors (Amendment) Regulations 2011 (PDF, 53 Kb)
Draft Statutory Auditors and Third Country Auditors (Amendment) Regulations 2011 (PDF, 64 Kb)
The final regulations also implement the Decision for Statutory Auditors in respect of any audits which they conduct of UK-traded non-EEA companies. As a result, statutory auditors will continue to be exempted from the requirements of the Disclosure and Transparency Rules implementing Article 45 of the Audit Directive (DTR 4.1.7(R)).
The new Commission Decision has replaced Decision (2008/627/EC), which allowed the introduction of provisions on the registration and regulation of third country auditors.
The registration and regulation of third country auditors in the UK is the responsibility of the Professional Oversight Board of the Financial Reporting Council. Further information is available on the POB website
Transfer of audit working papers
The Audit Directive also introduced provisions to control the transfer of auditors' working papers to the audit authorities of countries outside the EEA. The Directive allows transfers of papers to those third countries whose audit regulatory authorities are approved as "adequate" by the European Commission, where those authorities have entered into working arrangements with EEA authorities.
On 5 February 2010 the European Commission issued the first determination of adequacy under the Directive, by issuing a Decision (2010/64/EU) ("the first Decision") in favour of the audit authorities of Canada, Japan and Switzerland. A second Decision (2010/485/EU) was issued on 1 September 2010. The Government BIS has made regulations to implement the Commission Decisions by amending Part 42 of the Companies Act 2006 via regulations under section 2(2) of the European Communities Act 1972. The Companies Act 2006 (Transfer of Audit Working Papers to Third Countries) Regulations 2010 (SI 2010/2537) are available on the Companies Act 2006 Regulations and Commencement Orders page.
This follows the publication of draft regulations to implement the first Decision for comment for a period of consultation which ended on Friday 28 May 2010. BIS has published a report of the comments made on the draft regulations explaining the changes that have been made in response to comments received, as well as to implement the second Decision.
Explanatory text - The Companies Act 2006 (Transfer of Audit Working Papers to Third Countries) Regulations 2010 (PDF, 59 Kb)
Consultation Draft - The Companies Act 2006 (Transfer of Audit Working Papers to Third Countries) Regulations 2010
