Audit makes a valuable contribution to the Luxembourg economy, says Jean-Michel Pacaud, retiring chairman of IRE
Jean-Michel Pacaud, partner at EY Luxembourg, has just stepped down as chairman of Luxembourg’s external auditors’ association, the Institut des réviseurs d'entreprises (IRE). He is replaced at the helm by Philippe Meyer, managing partner of KPMG Luxembourg.
Having completed 2 mandates as chairman, as well as having served as an external auditor for almost 30 years, Pacaud is of the view that his profession is about much more than being policemen to the financial sector, it also makes a valuable contribution to the Luxembourg economy.
Audit, as an official profession in Luxembourg started in 1984 and, like the financial sector it cares for, it has undergone monumental changes since then.
“The Enron scandal in 2002 was a major event that changed the face of the audit profession,” said Pacaud. “Regulators everywhere started to look very closely at the profession and steps were taken to ensure auditor independence.”
“It started in the US with PCAOB first, then EU’s 8th Directive of 2006, that was transposed into law in 2009,” Pacaud explained. “These two regulations introduced a real revolution. Previously the profession had been peer regulated, but with the introduction of the audit directive a new body was set up within the CSSF to provide oversight for the audit profession in Luxembourg.”
Next came the so-called “Barnier Directive”, which introduced further restrictions on non-audit fees. “It put a cap on the amount of non-audit fees a company could earn for other permitted services in order to reduce potential client influence on external auditors and increase their independence.”
According to Pacaud, this was all to have a positive impact on the profession. “As well as further narrowing the independence rules, it has increased the quality of audits and has allowed the profession to make a valuable contribution to the Luxembourg economy, and not just be policemen.”
“The role of the external auditor in the Luxembourg economy is unique,” said Pacaud. “We have more than 550 qualified auditors registered with IRE and the CSSF and, altogether, the audit network employs 9,000 people, representing 2% of the total work force.”
“Auditors are also represented on many professional associations, working hard to transcribe regulations and drawing up draft laws, as well as promoting Luxembourg in economic missions abroad with the government.”
As his tenure as chairman of IRE comes to an end, Pacaud reflects that he is proud of how the association has, “defended the interests of the profession on their clients' behalf and has maintained excellent dialogue with the regulator. We have always managed to find the most practical and appropriate solutions.”
What we mean by…
“The PCAOB is a nonprofit corporation established by Congress to oversee the audits of public companies in order to protect investors and the public interest by promoting informative, accurate, and independent audit reports.The PCAOB also oversees the audits of brokers and dealers, including compliance reports filed pursuant to federal securities laws, to promote investor protection. The Sarbanes-Oxley Act of 2002, which created the PCAOB, required that auditors of U.S. public companies be subject to external and independent oversight for the first time in history. Previously, the profession was self-regulated.”
The EU 8th Directive: “In response to major financial scandals in the US and Europe surrounding companies such as Enron, Worldcom, Arthur Andersen and Parmalat, the European Commission published an action plan aimed at restoring the confidence of investors in audited accounts, preventing corporate fraud and improving corporate governance in general. The EU Corporate Governance Action Plan, released in 2003, is wide ranging and will come into force in different phases, starting in 2006. One of the proposed near-term measures is the revision and modernisation of the 8th Company Law Directive.” Source: treasurytoday.com