Audit set to form part of the ESEF mandate
Together with a press release marking the publication of the ESEF Regulatory Technical Standards in the Official Journal of the European Union, the European Commission published an ESEF Q&A, that provides answers to frequently asked questions. Significantly, it includes the following question and answer:
7) What kind of assurance will be provided for financial statements prepared in compliance with ESEF? Will auditors check ESEF-compliant reports?
Considering that the ESEF Regulation is a binding legal instrument, the Commission services are of the view that the provisions included therein shall be considered as “statutory requirements” within the meaning of Article 28(2)(c)(ii) of the Audit Directive.
In other words, the European Commission considers that the single document nature of Inline XBRL means that all aspects of the disclosure (including the XBRL markup contained in these documents) need to be subject to audit.
This has a couple of very significant implications. First, that NCAs (the national regulators) need to collect the ESEF document (a single document) as the audited financials and should not consider “dual” filing of a PDF and and an Inline XBRL file. Second, that there needs to be relevant audit literature. The Q&A goes on to consider both points. The EC has made public the fact that it has asked the “Committee of European Auditing Oversight Bodies (CEAOB) to explore how the audit of ESEF could be carried out in practice, with a view to possibly provide guidance to the market.”
We very much welcome these developments and look forward to discussing these issues with our Members and Stakeholders (in Europe and around the world) in the coming weeks.
The Q&A is here.