The EU Statutory Audit Directive (“Directive 2006/43/EC”) requires that statutory audit entities and auditors from third countries providing audit services to companies incorporated outside the EU/EEA whose transferable securities are admitted to trading on a regulated market in the EU/EEA should be entered on a public register, and subject to a level of regulation equivalent to the minimum required for EU/EEA auditors.

Article 45 of the Audit Directive sets out regulatory requirements for the registration of third country audit entities, for continuing oversight including the external monitoring of the quality of their audit work, and for investigations and sanctions.

Article 46 allows Member States to derogate from these requirements where the third country audit entity is subject to a system of public oversight, inspections and investigations which the European Commission has recognised as equivalent, or where the third country audit entity is within transitional arrangements adopted by the European Commission.

Deciding on equivalence is a matter for the European Commission and Member States. There is a work programme in place to assess the equivalence of third countries’ regulatory systems. To date, no third country regulatory system has been recognised as equivalent by the European Commission.

The Commission Decision 2008/627/EC of 29 July 2008 exempts for a transitional period certain third country audit entities from the requirements of Article 45, on the condition that they provide relevant Member States with specific information. Member States may register such audit firms to this end. The transitional period applies in respect of audits of annual accounts for financial years starting between 29 June 2008 and 1 July 2010. The Commission Decision is applicable to third country audit entities whose “home country” is one of the following: Argentina, Australia, Bahamas, Bermudas, Brazil, Canada, Cayman Islands, Chile, China, Croatia, Guernsey, Jersey, Isle of Man, Hong Kong, India, Indonesia, Israel, Japan, Kazakhstan, Malaysia, Mauritius, Mexico, Morocco, New Zealand, Pakistan, Russia, Singapore, South Africa, South Korea, Switzerland, Taiwan, Thailand, Turkey, Ukraine, United Arab Emirates and United States of America.

EU auditor oversight bodies, with the support of the European Commission, recognise the importance of putting in place practical arrangements for third country audit firms that are not over-burdensome and follow as far as possible a common approach across the EU. To this end, the members of the European Group of Auditors' Oversight Bodies (EGAOB) have worked together with the objective that third country audit entities will be able to use application forms and guidance material that is as similar as national regulatory systems permit.

The further intention is that Member States:

    • will work closely together in considering applications for registration to minimise the chance that different decisions on registration will be taken in different Member States. However, registration remains necessary in each Member State where a non-EU company's securities are admitted to trading on a regulated market;

    • will, in the longer term, work closely together, and with third-country audit regulators, to minimise overlapping or duplicative regulatory requirements, for example on external inspections of third country audit entities.