New provisions regarding the statutory audit and the internal audit

The law ransposes at national level a number of requirements imposed by EU through Directive 2014/56/EC and thorugh the European regulation no. 537/2014 as part of the reform of the regulatory framework of financial markets regarding the role and mode in which the function of the financial auditor can be consolidated in order to contribute to the improvement of financial stability and the investors’ protection.
The new law includes provisions that establish a conraventional liability for:

• public interest entities that do not observe the requirements regarding the organization and operation of the audit board;
• the entities the yearly financial statements of which are subject to the statutory audit and that do not organize and do not ensure the exercise of the internal audit activity.

The contraventions for these two aspects shall be sanctioned with fine from 50.000 RON up to 100.000 RON.
Another novelty is that the definition of the statutory audit was extended over volunteer audits performed by small entities and that publish the financial statements and the audit report.
The audit board
The public interest entities must have an audit board.
The audit board must be an independent board or a committee of the board of directors or of supervision of the audited entity.
The audit board is made-up of non-executive members of the board of directors or of supervision of the audited entity and/or the members appointed by the general shareholders meeting of the audited entity.
The audit board has, among others, the following duties:

• informs the directors of the entity or the members of the board of administration/supervision of the audited entity, as applicable regarding the results of the statutory audit and explain who did the statutory audit contribute to the integrity of financial reporting and what was the role of the audit board in this process;
• monitors the process of financial reporting and sends recommendations or proposals to ensure its integrity;
• monitors the effectiveness of the systems of internal quality control and the systems of management of the entity’s risk and, as applicable of the internal audit regarding the financial reporting of the audited entity, without breaching its independence;
• monitors the statutory audit of the yearly financial statements and the yearly consolidated financial statements, especially its performance;
• assesses and monitors the independence of financial auditors or compliance audit firms and analyzes the opportunity of providing certain services that are not audit related by the audited entity;
• is responsible for the procedure of selecting the financial auditor or the audit company and recommends to the general meeting of shareholders/members of the board of administration the financial auditor that is to be appointed.

Internal audit
All the entities the yearly financial statements of which are subject to the statutory audit are obliged to organize and ensure the exercise of the internal audit activity.
The statutory audit is an audit of the yearly separate financial statements or of the yearly consolidated financial statements in accordance with the international audit standards, to the extent that:

• it is compulsory pursuant to EU or internal law (according to art. 34 of Accounting Law 82 of 1991, chapter 10 of Order 1802/2014 or other legal provisions, as applicable);
• it is performed on a voluntary basis to small entities and the audited financial statements are published along with the statutory audit report

The financial auditor who is responsible for carrying out an internal audit according to the provisions of art. 1 of the Decision of CAFR (Chamber of Financial Auditors of Romania) Council no. 48/2014 for the adoption of Compulsory rules from the international framework of professional practices (IIA Global).
The internal audit activity can be organized in a distinct section, in the organizational structure of the entity, or, optionally, it can be outsourced, case in which it will take place on contractual bases.

Darian DRS AUDIT can help you in the organization and exercise of the internal audit.
The Darian DRS AUDIT team is at your disposal with pleasure for any questions or discussions regarding this topic.

Sincerely,
The Darian DRS Tax team