THE FRENCH
STATUTORY
AUDIT
STATUTO RY
AUDITORS SERVING
THE PUBLIC INTEREST
The President’s
editorial
French statutory audit, the “Commissariat aux Comptes” , which was first
created in 1863, has demonstrated all along its history that it was
capable to adapt to a changing economy, thereby serving the public
interest on a continuous basis.
For many years the “Compagnie Nationale des Commissaires
aux Comptes” has dedicated itself to serving its 13,625 professional
members, and more widely, to the economy and the society as a whole
by conducting actions aimed at ensuring audit quality and at extending
the scope of statutory audit.
The society more than ever needs confidence, transparency and security.
So does the economy to recover the path of growth.
Drawing on their professional standards, and their ethics, French
statutory auditors work in the name of public interest and bring,
through their opinions on the financial statements, an indubitable added
value to the economy.
These few pages will enable you to appraise the present role of the
statutory audit in France, the part played by the statutory auditors in
bringing trust and confidence to the economy, and the vision we have
for the future of a profession which knows how to respond to the needs
of an ever-changing society.
YVES NICOLAS
President of the
« Compagnie Nationale des Commissaires aux Comptes »
3
Table of content
What we do?
>
5
Who we are?
>
7
How we work?
>
8
Where we are?
>
9
Glossary
>
10
The President’s editorial
4
What we do?
1
The statutory audit is primarily a matter of providing confidence.
In enhancing the credibility of the financial statements of the
audited entity, the statutory auditor provides confidence to the
market and to the economy as a whole.
By providing the opinion of an independent and competent
professional on the financial statements of companies, the statutory
audit is useful to all the stakeholders of the company and ultimately
to the society as a whole.
Already essential in a period of growth, it becomes crucial in times
of crisis.
MORE AND MORE SECTORS ARE COVERED
In all sectors of the economy, there are entities which are sub-
ject to statutory audit.
In France, the first entities which were subject to statutory audit
were limited companies which were required by the July 1867
law to appoint one or more auditors to audit their financial
statements. Over the years, the scope of the entities subject to
statutory audit has grown regularly, taking into account the size
and the nature of the entities. Such an extension of the scope
of statutory audit has led to the audit being present in all sectors
of the economy including the not-for-profit and the public
sectors.
MORE AND MORE ENTITIES ARE SUBJECT TO
STATUTORY AUDIT
All entities have an interest in having external controls: whether
large or small companies, public interest or private entities, State
owned entities, not-for-profit charities, all of them need to
demonstrate transparency to their stakeholders.
In France, the following entities are subject to statutory audit:
> All public limited companies.
> Simplified joint stock companies which are part of a group
or which are over two of the three following thresholds:
• 20 employees.
• 2 million Euros of turnover or resources.
• 1 million Euros of total assets.
> Other undertakings including limited liability companies
which are over two of the three following thresholds:
• 50 employees.
• 3,1 million Euros of turnover or resources.
• 1,55 million Euros of total assets.
CHARITIES AND FOUNDATIONS
For many years, the law regularly extends the scope of interven-
tion of statutory auditors in not-for-profit organizations.
The objective is to increase the confidence of donors by assuring
greater transparency of accounts. It is therefore essential to be
able to know how public or private funds are used and distributed.
Charities are therefore subject to statutory audit when:
> they perform an economic activity and exceed two of the
three following criteria:
• 50 employees.
• 3.1 million Euros of turnover or resources.
• 1.55 million Euros of total assets.
> they benefit from French State of public authorities subsidies
for a yearly global amount over 153 000 Euros.
> they receive from donors annual gift of a total amount of
153 000 euros for which a tax receipt has been issued.
PUBLIC SECTOR ENTITIES, SOCIAL SECURITY,
HOSPITAL, UNIVERSITIES AND TRADE UNIONS
The need for increased transparency is also at the core of new
engagements:
> in the social security system, since 2006.
> in universities since 2008.
> in trade unions since 2010.
> in public hospitals in 2014.
In addition to public sector entities (which are of ten State-owned
in France), many other entities are equally required to appoint
a statutory auditor:
> endowment funds.
> credit institutions, saving banks, mutual funds under certain
criteria.
> agricultural cooperatives.
> chambers of Commerce…
In all these entities, whether in the public sector or in the not-
for-profit sector, the statutory auditor’s engagement requires
a deep technical knowledge of the specifics of the sector, par-
ticularly the accounting principles or the legal aspects of the
sector or the management systems used.
5
>
The turnover of the profession is
more than 2.6 billion euros for approximately
230,000 statutory audit engagements.
ENGAGEMENTS ACCORDING TO
THE NUMBER OF EMPLOYEES
•
0 to 10 employees 122,000
•
11 to 20 employees 32,000
•
21 to 50 employees 42,000
•
More than 50 employees 34,000
Total 230,000
ENGAGEMENTS BY CATEGORIES OF
ENTITIES
Categories of entities
•
Commercial entities 78 %
•
Charities & foundations 11 %
•
Others 11 %
15 %
18 %
53 %
14 %
11 %
11 %
78 %
AUDIT ADAPTED TO SMALL ENTITIES
Since the Economic Modernisation Act, adopted in 2008, the law requires the auditors to perform their engagement in certain
small entities in compliance with a specific professional standard, adapted to the size and issues of small entities. It has to be
noted that complying with that specific standard still leads to performing an audit and issuing an audit opinion on the financial
statements of the entity. It does not lead to a lower level of assurance. It is important to note that the European Union now
recognizes the validity of such approach since article 26 (5) of Directive 2014/56/EU states that: “Where a Member State requires
the statutory audit of small undertakings, it may provide that application of the auditing standards referred to in paragraph 1 is
to be propor tionate to the scale and complexity of the activities of such undertakings. Member States may take measures in order
to ensure the proportionate application of the auditing standards to the statutory audits of small undertakings”.
6
What we do?
1
Who we are?
2
The « Compagnie Nationale des Commissaires aux Comptes
(CNCC) » is the only representative body of the statutory audit
profession in France. It is an independent institute placed under
the auspices of the Ministry of Justice. The supervision of the
profession is under the responsibility of the Haut Conseil du
Commissariat aux Comptes (H3C), an independent authority
created in 2003.
EUROPEAN HARMONISATION
The Statutory audit directive of 2006 has led to an increased
harmonization of the organization and the practice of statutory
audit in Europe. It has clarified the responsibilities of statutory
auditors, their ethics and the conditions of their independence.
It has introduced a system of public supervision of the profes-
sion in Europe including quality assurance.
It has also provided for the definition of an audit firm network
and has set the requirement to use International Standards on
Auditing (ISA) once they have been adopted at the European
Union level.
It must be noted that prior to the directive of 2006, The French
statutory audit profession already had a strong system of public
supervision (the H3C, see above) since 2003. French profes-
sional standards were based on ISAs since 1999 and a system
of inspections and quality control had also been established
and conducted in connection with stock exchange regulator
since 1983.
The European Audit Reform, launched in 2010, is now finalized
at the European level with the publication of the Regulation
(EU) N° 537/2014 and the Directive 2014/56/EU. We are now
entering into the transposition period at the national level and
it will certainly lead to major changes in the statutory audit
market in Europe.
THE GOVERNANCE OF THE FRENCH
INSTITUTE OF STATUTORY AUDITORS
The CNCC is governed by a National Council and a Board which
support and promote the interests of the profession. The CNCC
is in constant dialogue with the Public authorities for all issues
of interest to the profession. It coordinates the actions of the
Compagnies régionales des Commissaires aux Comptes (CRCC),
ie the regional chambers of statutory auditors in France.
THE NATIONAL COUNCIL
Being the decision making body of the institute, its role consists
in:
> Elaborating and approving the professional standards. There
are 47 French professional standards (Normes d’exercice
professionnel: NEP).
> Giving its opinion when required by the Ministr y of Justice on
draft laws and decrees.
> Submitting to the Public authorities all useful proposals rela-
ting to the professional organization and the audit assignment.
THE BOARD
Being the executive body of the institute, its main activities are:
> The coordination of the actions of the regional chambers of
statutory auditors.
> The examination of the proposals made by the regional cham-
bers.
> The prevention and conciliation of professional litigation
between regional chambers.
Furthermore, it submits to the endorsement of the Ministry of
Justice the professional standards, adopted by the National
Council.
THE REGIONAL CHAMBERS OF STATUTORY
AUDITORS (« COMPAGNIES RÉGIONALES DES
COMMISSAIRES AUX COMPTES - CRCC »)
There are 33 « Compagnies régionales des commissaires aux
comptes (CRCC) » in France and overseas in the French
territories. Their main tasks are to:
> Defend the interests of the statutory auditors at the regional
level.
> Participate in the quality control of statutor y audit firms having
non-PIEs clients.
> Ensure that their members respect the CPE requirements.
> Communicate with local actors and partners.
> Promote the profession to students, organize regular training
activities and take part in university and school forums.
7
How we work?
3
THE COMMITTEES OF THE CNCC
The Committees of the CNCC are in charge of setting the
professional standards and guidance. They set, in particular,
the professional auditing standards (Normes d’exercice profes-
sionel: NEP), which are ultimately endorsed by the Minister of
Justice and published in the Official Journal of the French
Republic, after the Minister of Justice has received the opinion
of the H3C on the standard.
The Committees of the CNCC are also in charge of responding
to specific questions from the practitioners and of undertaking
studies on specific issues. Every year, they answer more than
500 questions from statutory auditors.
THE DEPARTMENT FOR THE STATUTORY AUDIT
OF LISTED ENTITIES
Within the CNCC , one of its departments gathers the audit firms
that audit listed entities.
Created in 2001 and endorsed by the Financial Security Act in
2003 , the DMF department deals with the specifics of the audit
engagement in listed entities. It liaises with the Autorité des
Marchés Financiers (AMF), ie the stock exchange regulator.
THE INTERNATIONAL DEPARTMENT FOR AUDIT
AND ACCOUNTING
The International Delegation for audit and accounting (« Délé-
gation Internationale pour l’Audit et la Comptabilité », DIPAC)
gathers the international affairs departments of the CNCC and
of the Conseil Supérieur de l’Ordre des Experts-Comptables
(CSOEC), the French Institute of chartered accountants.
The members of the DIPAC represent the French profession at
international level and participate in the work performed in
International and European organizations such as IFAC and FEE .
They meet regularly to liaise with representatives of other
professional institutes from Europe and from the rest of the
world.
Through its cooperation programs, the French profession plays
an important role in the development of the accountancy pro-
fession, especially in French-speaking Africa, Central Europe,
South East Asia, the Caribbean and Central America.
SPECIFIC REQUIREMENTS OF THE LAW AS PART
OF THE ROLE OF STATUTORY AUDITOR
The French law also requires the statutory auditor to perform
a number of specific obligations as part of its role as statutory
auditor, such as the launching of an early warning procedure in
case of uncertainties relating to the going concern of the entity.
Such role helps prevent business failure. The duration of the
audit engagement in France is six years, renewable without
limit. The French law also requires the appointment of joint
auditors for the audit of consolidated financial statements.
PROFESSIONAL STANDARDS, TECHNICAL AND
ETHICAL GUIDANCE AND TOOLS
International auditing standards constitute the basis from which
French professional standards (NEP) are established by the
CNCC and adapted to the national context.
French auditors are subject to a national Code of ethics
established by the Ministry of Justice and endorsed by a Decree.
The French Code of ethics and the Commercial Code limit the
provision of non-audit services to an audit client to those
services which are directly related to the audit as defined by a
professional standard.
The French profession considers that in a global economy, the
implementation of global tools, being both technical and
ethical, is a necessity since it helps having the same quality of
audits and provides an equal level playing field for auditors in
different countries.
8
Where we are?
4
How to find a statutory auditor in France ?
Every auditor is registered in a regional chamber (Compagnie Régionale des Commissaires aux Comptes, CRCC).
To find the appropriate CRCC, click on www.cncc.fr under “organization / les regions”
The french statutory audit profession
consists of
13,625 statutory
auditors (« Commissaires aux Comptes »),
all of them in public practice.
NUMBER OF AUDITORS
Individuals
13,625
Legal entities
5,715
LES 33 CRCC RÉGIONALES
DES AUTORITÉS DE PROXIMITÉ
Les compagnies régionales des commissaires aux comptes
(CRCC) sont dotées de la personnalité morale. Elles sont
administrées par un Conseil régional élu qui désigne un
bureau et le Président de la compagnie régionale.
Elles ont pour principales missions :
>
d’accompagner leurs membres et d’assurer la défense
de leurs intérêts,
>
de les aider à exercer leur mission,
>
de participer au contrôle d’activité,
>
de veiller au suivi des obligations de formation de leurs
membres,
>
de jouer un rôle de communication auprès des acteurs et
partenaires locaux,
>
de valoriser la profession auprès des jeunes en organisant
régulièrement des actions de formation et en participant à
des forums d’universités ou d’écoles.
Par ailleurs, dans le cadre des liaisons avec les autorités et
les pouvoirs publics régionaux, les compagnies régionales
interviennent souvent dans la formation des magistrats et
des offi ciers de police judiciaire.
LES 33 COMPAGNIES RÉGIONALES REPRÉSENTENT LOCALEMENT LA PROFESSION. EN RELAIS DE LA
COMPAGNIE NATIONALE, ELLES ENTRETIENNENT DES LIENS DIRECTS ET RÉGULIERS AVEC L’ENVIRONNEMENT
JURIDIQUE, POLITIQUE ET ÉCONOMIQUE RÉGIONAL.
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33 CRCC ORGANIZED ACCORDING
TO 33 COURTS OF APPEAL
9
The statutory audit engagement
The “statutory audit engagement ” leads the statutory auditor to issue an opinion
on the financial statements of the audited entity. The statutory auditor can also
provide other services (whether assurance or non-assurance engagements)
directly related to the “statutory audit engagement ”, such as issuing an opinion
on interim financial statements or, for example, carrying agreed-upon procedures.
French Professional Standards (Normes d’exercice professionnel: NEP)
In conducting its engagement, the statutory auditor applies the professional
standards, set by the CNCC and endorsed by the Ministry of Justice, after the
latter has obtained an opinion from the French oversight body, the « Haut Conseil
du Commissariat aux Comptes » (H3C). The French professional standards are
based on the international auditing standards (ISA).
Directly Related Services (DDL)
Directly related to the statutory audit assignment, these services are performed
at the request of the client. They include, for example, due diligences in the
context of an acquisition, agreed-upon procedures or consultations on accoun-
ting matters.
Code of ethics
Adopted by a decree on 16th November 2005, it states the fundamental
principles of the statutory auditor’s professional behaviour and ethics.
The Financial Security Act
Law adopted on the 1st August 2003; it aims to reinforce the legal provision of
company’s governance. It establishes the French oversight body (H3C) and
redefines the role and the statute of the French statutory auditor.
The Economic Modernisation Act
Law adopted in August 2008, it opened the way to a simplified approach for
the statutory audit of the financial statements of certain small entities. Thus,
since 1st January 2009, statutory auditors are required to comply with a speci-
fic so-called standard “Norme PE” to carry out their statutory audit engagements
in certain small entities.
Public interest entities
“Public Interest Entities” mean companies whose securities and bonds are traded
on a regulated market, such as the insurance under takings, the banks and other
specific entities.
The “Commissaire aux comptes”
The French Statutory Auditor.
Glossary
5
10
16, avenue de Messine - 75008 Paris
Tel. + 33 1 44 77 82 82 - Fax + 33 1 44 77 82 28
www.cncc.fr
cncc.c[email protected]
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