The Council of Ministers has approved two standards that update the accounting and auditing framework, adapting it to European regulations, and that will help improve the quality of financial information and its supervision, thereby reinforcing investor confidence and the strength of capital markets.
These are two Royal Decrees that approve, on the one hand, the regulations developed by Law 22/2015, on Auditing of Accounts, and, on the other, the General Accounting Plan approved by Royal Decree 1514/2007.
Transparency, independence and guarantee of the public interest function
The main objective of the modification of the audit framework is to complete the regulations derived from the regulatory reforms in the field of the European Union adopted as a result of the previous financial crisis, integrated by Directive 2014/56. These regulations were transposed in Spain through Law 22/2015 on Auditing of Accounts, which was pending the necessary regulatory development, which is complied with by this Royal Decree.
The fundamental objective of this new framework is to increase confidence in this activity and the credibility of the audit report, reinforce the transparency in the performance of the auditors, their independence and the improvement of quality, as well as promote uniform public supervision in all the whole of the European Union.
This Regulation will provide more clarity and security in the interpretation and execution of the provisions of the Act on Auditing of Accounts of 2015, thus helping to increase the reliability of the financial information that is audited and that is trusted by third parties operating in the market. . In this way, the audit fulfills its function of public interest.
To carry out the strengthening of the independence of the auditors, the mechanisms are in place to avoid conflicts of interest, as well as the necessary documentation requirements in the papers of the commission for the analysis of threats to independence, as well as the possible measures of safeguard. This documentation is subject to public supervision to guarantee compliance with legal requirements. The details of the calculation rules are also established to determine the limits to economic dependence to reach a certain level of concentration of fees.
Regarding the transparency of the auditors’ work, the regulations establish a set of publicity requirements, among which are the obligation to issue an annual transparency report for auditors of public interest entities and the obligation to publish the results. of the periodic inspections carried out on these auditors by ICAC.
Independent and autonomous accounting regulations, adapted to the European framework
Regarding the reform of the General Accounting Plan, it is an important step in the convergence strategy of Spanish accounting law with the international financial standards issued by the International Accounting Standards Board, as well as the Audit Directive and the Regulations ( EU) audit of financial accounting public interest entities adopted by the European Union (IFRS-EU), specifically in the areas of accounting for financial instruments (IFRS-EU 9) and revenue recognition (IFRS-EU fifteen).
This means having an independent and autonomous internal accounting regulation due to the relevant tax and commercial effects it produces, but at the same time adapted to the IFRS-EU.
This adaptation does not apply to SMEs, since they are subject to a simplified reporting regime. Nor does it apply to financial institutions, with a specific accounting framework drawn up by the Bank of Spain.
Spanish listed groups already directly apply the international financial reporting standards adopted by the European Union (IFRS-EU), so the regulatory adaptation carried out allows the companies that are members of these listed groups to apply a financial reporting framework in their individual annual accounts adapted to these international accounting principles and criteria and therefore more consistent with the framework used in the consolidated group.
Financial market supervisors and auditing professionals, through the corporations that represent them, the General Council of Economists of Spain-Registry of Auditing Economists and the Institute of Chartered Accountants of Spain. Also professionals from the university field and Public Administrations and representatives of investors and companies, in addition to their debate in the Accounting Advisory Committee and the approval of the Accounting Council. This guarantees the quality of the approved text, incorporating considerations from all the parties affected by it.