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FMA and AOBA (APAB) intensifying and institutionalising dialogue between supervisory authorities, auditors and supervisory board members

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As a lesson learned from the most recent financial and accounting scandals, discussion is currently ongoing at European level for a far-reaching reform about accounting and auditing. The objective is to improve the quality of accounting of exchange-listed companies or of public-interest entities (PIEs), and therefore to strengthen the stability of the financial markets and investor confidence. “Supervisory authorities, auditors and supervisory boards therefore have an important duty for the real economy. Their work increases the credibility of published financial information and contributes towards protecting financial market participants,” remarked Peter Hofbauer, the spokesperson for the board of the Audit Oversight Body of Austria (AOBA – Abschlussprüferaufsichtsbehörde APAB). And Michael Hysek, the Managing Director for Banking Supervision at the FMA added, “Regulatory requirements are becoming increasingly more diverse and complex. Which is a good reason for intensifying the dialogue between supervisory institutions at all levels.” The FMA and the AOBA have therefore seized the initiative and have come up with a joint conference format, in order to institutionalise an open dialogue between the supervisory institutions, both within and outside of undertakings. More than 400 supervisory board members participated at the first online conference and discussed with an esteemed group of speakers about the “Particular challenges for the audit committee of public-interest entities (PIEs)”.

An active interest in dialogue and training

“Supervision may only function, when undertakings are scrutinised from all sides, and where relevant points are then addressed adequately. This event is an important step towards institutionalising dialogue between the authorities, the members of the supervisory board and the firm’s control instances. The active interest in the conference furthermore proves that there is substantial interest in information and training at all levels,” remarked Friedrich Rödler, Chairperson of the Supervisory Board of ERSTE Group Bank AG.

Stricter rules – increased requirements

In her introductory keynote, Professor Annette Köhler from the University of Duisburg-Essen and Chairperson of the Audit Committee of the German GEA Group AG talked about the lessons learned from the Wirecard scandal, which were implemented in Germany on 01 July 2021: these include the compulsory establishment of audit committees for PIEs, the stricter rotation regime for both internal and external auditors, the increased fines for selected breaches as well as the obligation that two members of the audit committee will be required to be proven financial experts. “This contributes to allowing sparring as equals, and improves the quality of discussion in supervisory boards”, remarked Annette Köhler. At the same time, she remarked: “After the reform, is before the reform. Further changes are likely – for example regarding the extension of the subject matter of the audit as well as a separation of audit and advisory services.” It should be noted that the first measures arising from the lessons learned from the Wirecard scandal are already in force in Austria.

The 3 Cs for audit committees: competence – checking – communication

The FMA’s experts, Angelika Casey and Karin Tenora introduced a number of practical tips into the discussion: “Apply the 3 Cs rules for supervisory boards and their committees: competence – checking – communication. Auditors, the audit committee and the supervisory authority need to communicate intensively with one another.” There should be a particular focus on the important subject matters for the audit and the particular risks, known as “Key Audit Matters” (KAMs) in the audit opinion, that are currently too heavily standardised, rather than being specifically tailored to the company in question. The audit committee should not be afraid to make use of external knowledge. “Invite the state commissioner to the next meeting of your audit committee, request copies of all external reports such as the outcomes of on-site inspections conducted by the FMA and OeNB.”

AOBA’s Executive Director, Michael Komarek, recommended exercising particularly caution with regard to non-audit services, as they can compromise the auditors’ independence. The fee structure for the auditor should also be enquired about. In addition he also strongly advised against the the delegation of monitoring duties of the audit committee.

Eva Eberhartinger, Professor at Vienna University of Economics and Business, reminded about the necessity of ensuring that there are a diverse range of qualifications in supervisory boards: “In addition to financial expertise, it is also necessary to ensure that there is a competence regarding sustainably in the control function – as well as persons who understand the business model and markets well.” Every individual member of the supervisory board needs fulfil two particular competences: “Independence of mind, in terms of a critical and benevolent persistence when making enquiries, as well as tenacity in pursuing those points that they consider important.”

Enquiries should be addressed to:

FMA: Klaus Grubelnik
M: +43 676 88 249 516
T:  +43 1 24959-6006
E: [email protected]

AOBA (APAB): Gaisberg Consulting – Paul Trummer
M: +43 664 612 92 14
T: +43 1 522 78 04-51
E:  [email protected]  

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