Fact sheet 3: Expanded Audit Committee Responsibilities
Expanded Audit Committee Responsibilities
The EU audit legislation introduces new responsibilities for audit committees. While many of the rules are already widely in use and considered best practice, there are a number of accountabilities that will substantially impact those overseeing their company’s audit. Read this fact sheet to understand how the changes will affect the audit tender process, approval of non-audit services and membership of the audit committee itself.
The new EU legislation introduces additional requirements specific to the role and responsibilities of audit committees; as well as changes to auditor oversight. In reality, most of the requirements for audit committees set out in the legislation are already being performed today and represent ‘best practice’. Therefore the main shift is that these requirements are now being enshrined in law.
The changes specify that each EU-based public interest entity must have an audit committee. The committee may be either a standalone forum or a committee of the administrative body or supervisory body of the audited entity. However, the functions assigned to the audit committee may be performed by the administrative or supervisory body as a whole.
The Audit Tender Process
Audit committees are responsible for submitting a recommendation to the administrative or supervisory body of the audited entity for the appointment of the auditor. The recommendation should include at least two possible choices for the audit engagement and a justified preference for one of them.
Tender documents should contain transparent and non-discriminatory selection criteria to be used for the evaluation of proposals. The audited entity is required to prepare a report on the conclusions of the selection procedure, which is validated by the audit committee, to demonstrate that the selection procedure was conducted in a fair manner.
Key questions addressed by this fact sheet include:
- Who can be on an audit committee?
- What are the key provisions affecting audit committee oversight of public interest entity statutory audits?
- Are there any exemptions from the requirement to have an audit committee?
This fact sheet applies to the EU baseline rules. The final regulatory environment will be impacted by how each EU Member State interprets the legislation and any derogations they choose to implement.
© 2023 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services to clients. All rights reserved.
KPMG refers to the global organization or to one or more of the member firms of KPMG International Limited (“KPMG International”), each of which is a separate legal entity. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. For more detail about our structure please visit https://kpmg.com/governance.
Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.
Connect with us
- Find office locations kpmg.findOfficeLocations
- Social media @ KPMG kpmg.socialMedia