Date: 2022-07-25Category: Not ApplicableState: Union GovernmentCountry: Europe
Commission Implementing Decision (EU) 2022/1298 of 22 July 2022 on the equivalence of the systems of public oversight, quality assurance, investigation and penalties for auditors and audit entities of the competent authorities of the United States of America pursuant to Directive 2006/43/EC of the European Parliament and the Council (notified under document C(2022) 5118) (Text with EEA relevance)
Executive Summary:
This Commission Implementing Decision (EU) 2022/1298 establishes the equivalence of public oversight, quality assurance, investigation, and penalty systems for auditors and audit entities of the U.S. Securities and Exchange Commission and the Public Company Accounting Oversight Board with EU standards, as per Directive 2006/43/EC. This decision, effective from August 1, 2022, to July 31, 2028, allows continued cooperation between EU and U.S. authorities but may be reviewed earlier if necessary. The decision is addressed to the Member States.
Key Points / Main Content:
Equivalence of Systems:
* The systems of public oversight, quality assurance, investigation, and penalties for auditors and audit entities of the U.S. Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB) are considered equivalent to the requirements in Articles 29, 30, and 32 of Directive 2006/43/EC.
Specific Situations:
* Member States must ensure audit engagements for U.S.-incorporated companies (whose securities are traded on an EU regulated market but not in the U.S.) are subject to their oversight systems.
* If such companies are listed in multiple Member States, those states should cooperate to ensure the audit engagement falls under one of their systems.
Cooperative Arrangements:
* The decision does not prevent Member States from establishing cooperative arrangements with U.S. authorities on quality assurance reviews.
Monitoring and Review:
* The Commission, assisted by the Committee of European Auditing Oversight Bodies, will monitor market developments, regulatory frameworks, and supervisory cooperation.
* The Commission may undertake a specific review of this decision before its expiry if relevant developments necessitate reassessment.
Time Limitation:
* The decision applies from August 1, 2022, to July 31, 2028.
Impact Analysis:
Member States:
Impact: Must recognize the equivalence of the U.S. systems and ensure audit engagements of certain U.S. companies are subject to their oversight. They should continue to cooperate with U.S. authorities.
Action Required: Implement the decision and cooperate with other Member States and U.S. authorities as needed.
Securities and Exchange Commission and the Public Company Accounting Oversight Board:
Impact: Their systems for auditor oversight are recognized as equivalent to EU standards, facilitating continued cooperation with EU authorities.
Action Required: Continue to cooperate with EU Member States competent authorities.
European Commission and Committee of European Auditing Oversight Bodies:
Impact: Responsible for monitoring the effectiveness of the decision and the progress toward mutual reliance on each other's oversight systems.
Action Required: Monitor market developments, regulatory frameworks, and supervisory cooperation, and potentially reassess the equivalence granted by the decision.
Auditors and Audit Entities:
Impact: Auditors and audit entities of the Securities and Exchange Commission of the United States of America and the Public Company Accounting Oversight Board of the United States of America shall be considered to meet requirements that are equivalent to those laid down in Articles 29, 30 and 32 of that Directive.
Action Required: No specific action is required.
Key Entities Referenced
European Commission: The executive branch of the European Union, responsible for proposing legislation, implementing decisions, upholding the EU treaties and managing the day-to-day business of the EU.
European Parliament: One of the legislative bodies of the European Union, directly elected by EU citizens.
Council of the European Union: A legislative body of the European Union comprised of government ministers from each member state.
United States of America: A country, whose systems of public oversight, quality assurance, investigation and penalties for auditors and audit entities are being assessed for equivalence.
Securities and Exchange Commission: A competent authority of the United States of America responsible for overseeing the operations of the Public Company Accounting Oversight Board.
Public Company Accounting Oversight Board: A competent authority of the United States of America that approves the registration of external auditors and audit firms and inspects registered firms audits and quality control systems.
Directive 2006/43/EC: A directive of the European Parliament and the Council on statutory audits of annual accounts and consolidated accounts.
Sarbanes-Oxley Act of 2002: A United States law that reformed auditing and financial regulations for public companies.
L 196/138 EN Official Journal of the European Union 25.7.2022
COMMISSION IMPLEMENTING DECISION (EU) 2022/1298
of 22 July 2022
on the equivalence of the systems of public oversight, quality assurance, investigation and penalties
for auditors and audit entities of the competent authorities of the United States of America
pursuant to Directive 2006/43/EC of the European Parliament and the Council
(notified under document C(2022) 5118)
(Text with EEA relevance)
THE EUROPEAN COMMISSION,
Having regard to the Treaty on the Functioning of the European Union,
Having regard to Directive 2006/43/EC of the European Parliament and of the Council of 17 May 2006on statutory audits
of annual accounts and consolidated accounts, amending Council Directives 78/660/EEC and 83/349/EEC and repealing
Council Directive 84/253/EEC(1), and in particular Article 46(2), first subparagraph, thereof,
Whereas:
(1) By Commission Implementing Decision (EU) 2016/1155(2), the Commission decided that for the purposes of
Article 46(1) of Directive 2006/43/EC, the public oversight, quality assurance, investigation and penalty systems for
auditors and audit entities of the competent authorities of the United States of America, namely the Securities and
Exchange Commission and the Public Company Accounting Oversight Board, are to be considered to meet
requirements that are equivalent to those laid down in Articles 29, 30 and 32 of that Directive. Implementing
Decision (EU) 2016/1155 ceases to apply on 31 July 2022. Therefore, the equivalence of those systems should be
re-assessed.
(2) In the case of a company incorporated in the United States whose transferable securities are admitted to trading on a
regulated market of a Member State, but which are not admitted to trading in the United States, Member States
should ensure that all the audit engagements related to the financial statements of such companies are subject to
their systems of public oversight, quality assurance, investigation and penalties. Where such companies are listed in
more than one Member State, the Member States concerned should cooperate to ensure that the audit engagement
is included in the scope of one of their systems of public oversight, quality assurance, investigation and penalties.
Those arrangements should not prevent Member States from establishing cooperative arrangements on quality
assurance reviews between their competent authorities and the competent authorities of the United States.
(3) Any conclusion on the equivalence of the systems of public oversight, quality assurance and investigations and
penalties of a third country pursuant to Article 46(2) of Directive 2006/43/EC does not pre-empt any decision that
the Commission may adopt on the adequacy of the requirements met by the competent authorities of that third
country pursuant to Article 47(3), first subparagraph, of that Directive.
(4) The ultimate objective of cooperation between the competent authorities of the Member States and those of the
United States in the field of public oversight, quality assurance, investigations and penalties systems for auditors and
audit firms is to reach mutual reliance on each other’s oversight systems based on their equivalence.
(1) OJ L 157, 9.6.2006, p. 87.
(2) Commission Implementing Decision (EU) 2016/1155 of 14 July 2016 on the equivalence of the public oversight, quality assurance,
investigation and penalty systems for auditors and audit entities of the United States of America pursuant to Directive 2006/43/EC of
the European Parliament and the Council (OJ L 190, 15.7.2016, p. 80).25.7.2022 EN Official Journal of the European Union L 196/139
(5) Pursuant to the Sarbanes-Oxley Act of 2002(3), in the United States of America, the Public Company Accounting
Oversight Board approves the registration of external auditors and audit firms and inspects registered firms’ audits
and quality control systems. The Securities and Exchange Commission has competence to oversee the Public
Company Accounting Oversight Board’s operations. The Securities and Exchange Commission and the Public
Accounting Oversight Board are responsible for the adoption of audit standards and the investigation and
sanctioning of registered public accounting firms and their associated persons for violations of specified rules or
professional standards.
(6) The Committee of European Auditing Oversight Bodies has reassessed, in accordance with Article 30(7), point (c), of
Regulation (EU) No 537/2014 of the European Parliament and the Council(4), the public oversight, quality
assurance, investigation and penalty systems for auditors and audit entities in the United States, based on the
Sarbanes-Oxley Act of 2002, which has not fundamentally changed since the adoption of Implementing Decision
(EU) 2016/1155. Taking into account that technical assessment, the systems of the public oversight, quality
assurance, investigation and penalties for auditors and audit entities of the Securities and Exchange Commission and
the Public Company Accounting Oversight Board continue to meet requirements that are equivalent to those laid
down in Articles 29, 30 and 32 of Directive 2006/43/EC.
(7) Following Implementing Decision (EU) 2016/1155, several Member States’ competent authorities and the
competent authorities of the United States have organised joint inspections. Some competent authorities of the
Member States have implemented partial reliance, including by performing quality control inspections, on which
the Public Company Accounting Oversight Board has placed some reliance, and by dividing some focus areas of file
inspections between them. For the functioning of capital markets, it is important that the competent authorities of
the Member States and the competent authorities of the United States are able to continue the good cooperation
after 31 July 2022 with the objective of reaching mutual reliance on each other’s oversight systems. However, in
absence of full reliance, considering that the derogation provided for in Article 46 of Directive 2006/43/EC is based
on the principle of reciprocity, this Decision should be applicable for a limited period of time.
(8) Notwithstanding the time limitation, the Commission, assisted by the Committee of European Audit Oversight
Bodies, will monitor on a regular basis the market developments, evolution of the supervisory and regulatory
frameworks and the effectiveness and experience of supervisory cooperation, including the progress towards
reaching mutual reliance of each other’s oversight systems. In particular, the Commission may undertake a specific
review of this Decision at any time before the end of its period of application where relevant developments make it
necessary to re-assess the equivalence granted by this Decision. Such re-assessment may lead to the repeal of this
Decision.
(9) The measures provided for in this Decision are in accordance with the opinion of the Committee established by
Article 48(1) of Directive 2006/43/EC,
HAS ADOPTED THIS DECISION:
Article 1
For the purposes of Article 46(1) of Directive 2006/43/EC, the systems of public oversight, quality assurance, investigation
and penalties for auditors and audit entities of the Securities and Exchange Commission of the United States of America and
the Public Company Accounting Oversight Board of the United States of America shall be considered to meet requirements
that are equivalent to those laid down in Articles 29, 30 and 32 of that Directive.
(3) Public Law 107–204, 30 July 2002, 116 Stat 745.
(4) Regulation (EU) No 537/2014 of the European Parliament and of the Council of 16 April 2014 on specific requirements regarding
statutory audit of public-interest entities and repealing Commission Decision 2005/909/EC (OJ L 158, 27.5.2014, p. 77).L 196/140 EN Official Journal of the European Union 25.7.2022
Article 2
Article 1 shall be without prejudice to cooperative arrangements on individual quality assurance reviews between the
competent authorities of a Member State and the competent authorities of the United States of America.
Article 3
This Decision shall apply from 1 August 2022to 31 July 2028.
Article 4
This Decision is addressed to the Member States.
Done at Brussels, 22 July 2022.
For the Commission
Mairead MCGUINNESS
Member of the Commission