Upload
lalasa
View
35
Download
0
Tags:
Embed Size (px)
DESCRIPTION
THE EURO & THE AUDIT PROCESS RISK ANALYSIS, MATERIALITY AND CERTIFICATION November 14, 2000 Christian Perrier. Agenda. Introduction Business risks involved by the introduction of the euro Impact of euro-related risks on the audit process - PowerPoint PPT Presentation
Citation preview
THE EURO & THE AUDIT THE EURO & THE AUDIT PROCESSPROCESS
RISK ANALYSIS, RISK ANALYSIS, MATERIALITYMATERIALITY
AND CERTIFICATIONAND CERTIFICATION
November 14, 2000November 14, 2000
Christian PerrierChristian Perrier
2
PricewaterhouseCoopers
AgendaAgenda
IntroductionIntroduction
Business risks involved by the introduction of the euroBusiness risks involved by the introduction of the euro
Impact of euro-related risks on the audit processImpact of euro-related risks on the audit process
Incidence on auditor's opinion of inadequate preparation for Incidence on auditor's opinion of inadequate preparation for the eurothe euro
Euro implementation: the top priority for auditors in FranceEuro implementation: the top priority for auditors in France
3
PricewaterhouseCoopers
A new business environmentA new business environment
Implications of the euro are likely to be profound Implications of the euro are likely to be profound for companies with business transactions in for companies with business transactions in EuropeEurope
Need for all companies to adapt their Need for all companies to adapt their financial and other operating systemsfinancial and other operating systems
Additional longer term implications as the Additional longer term implications as the euro will increase competition within a larger euro will increase competition within a larger marketmarket
The importance of the economic event The importance of the economic event requires that every company addresses requires that every company addresses the issues arising from the introduction the issues arising from the introduction of the euroof the euro
4
PricewaterhouseCoopers
Progress of the changeover to the euroProgress of the changeover to the euro
During the transitional period, the principle of During the transitional period, the principle of "no compulsion, no prohibition" applies"no compulsion, no prohibition" applies
However, public awareness of the euro is still However, public awareness of the euro is still very limited according to a recent pollvery limited according to a recent poll
It is therefore the management's It is therefore the management's responsibility to identify the impact of responsibility to identify the impact of the euro and to make adequate the euro and to make adequate preparationspreparations
5
PricewaterhouseCoopers
Progress of the changeover to the euroProgress of the changeover to the euro
QuestionQuestion:: Have you already started preparations for the changeover to Have you already started preparations for the changeover to the euro in your company ?the euro in your company ?
SourceSource:: Survey by the French Ministry of Finance - September 2000Survey by the French Ministry of Finance - September 2000
Size of companySize of company
0 employee0 employee
Total from 1 to 499 employeesTotal from 1 to 499 employees
1 to 9 employees1 to 9 employees
10 to 49 employees10 to 49 employees
50 to 249 employees50 to 249 employees
250 to 499 employees250 to 499 employees
0%0% 20% 20% 40% 40% 60% 60% 80% 100% 80% 100%
% of preparation% of preparation
34%
60%
57%
66%
40%
43%
75% 25%
84% 16%
6%94%
Yes No
Business risks involved Business risks involved in the introduction in the introduction
of the euroof the euro
PricewaterhouseCoopers
7
PricewaterhouseCoopers
Business risks involved in the introduction of the euroBusiness risks involved in the introduction of the euro
Key euro-related business risks include:Key euro-related business risks include:
adverse impact on company's activityadverse impact on company's activity
inadequate preparation inadequate preparation
inappropriate systems and control inappropriate systems and control processprocess
8
PricewaterhouseCoopers
Adverse impact on company's activityAdverse impact on company's activity
The use of euro will increase competition The use of euro will increase competition
Transparency of prices across the eurozone will Transparency of prices across the eurozone will lead to pressure for less price discriminationlead to pressure for less price discrimination
Reductions in the price of goods and Reductions in the price of goods and services sold could lead to significant services sold could lead to significant decreases in revenues and profitabilitydecreases in revenues and profitability
9
PricewaterhouseCoopers
Adverse impact on company's activityAdverse impact on company's activity
In order to prevent such risks a company must:In order to prevent such risks a company must:
Compare its prices with those of competitorsCompare its prices with those of competitors
Determine the maximum discrimination Determine the maximum discrimination
acceptableacceptable
Assess the financial impact of alignment Assess the financial impact of alignment
Revise commercial and industrial strategies Revise commercial and industrial strategies
accordingly accordingly
10
PricewaterhouseCoopers
Inadequate preparationInadequate preparation
No commitment by top managementNo commitment by top management
Inappropriate planning of the euro projectInappropriate planning of the euro project
Inadequate arrangements for identifying and Inadequate arrangements for identifying and implementing necessary changesimplementing necessary changes
Inadequate resources allocated to the Inadequate resources allocated to the changeover processchangeover process
Inappropriate staff trainingInappropriate staff training
Non-compliance with the project planNon-compliance with the project plan
11
PricewaterhouseCoopers
Inappropriate systems and control processInappropriate systems and control process
Inadequate identification of key operating systems Inadequate identification of key operating systems
/ software requiring adaptation or replacement/ software requiring adaptation or replacement
Absence of procedures for handling both national Absence of procedures for handling both national
currency and euro during the transitional periodcurrency and euro during the transitional period
Loss of reference points for employeesLoss of reference points for employees
Internal control risksInternal control risks
12
PricewaterhouseCoopers
Inappropriate systems and control processInappropriate systems and control process
Inappropriate controls to prevent fraudulent Inappropriate controls to prevent fraudulent
activities and errors activities and errors
No identification of key customers / suppliers that No identification of key customers / suppliers that
will require transactions in euro during the will require transactions in euro during the
transitional periodtransitional period
Non compliance with tax and legal regulations (as Non compliance with tax and legal regulations (as
regards conversion method, rounding, tracking …)regards conversion method, rounding, tracking …)
Impact of euro-relatedImpact of euro-relatedrisksrisks
on the audit processon the audit process
PricewaterhouseCoopers
14
PricewaterhouseCoopers
Impact of euro-related risks on the audit processImpact of euro-related risks on the audit process
Statutory auditor's responsibilities are not Statutory auditor's responsibilities are not changed by the introduction of the eurochanged by the introduction of the euro
However, the statutory auditor needs to:However, the statutory auditor needs to:
have an adequate understanding of the have an adequate understanding of the issues that could arise from the euroissues that could arise from the euro
consider the company's plans and consider the company's plans and preparationspreparations
identify any significant euro-related risks identify any significant euro-related risks not yet addressed which could impact not yet addressed which could impact the going concern principlethe going concern principle
15
PricewaterhouseCoopers
Impact of euro-related risks on the audit processImpact of euro-related risks on the audit process
Depending on euro-related risks identified, Depending on euro-related risks identified, the auditor should plan appropriate audit the auditor should plan appropriate audit procedures (limited or extended)procedures (limited or extended)
Auditors have a range of audit techniques Auditors have a range of audit techniques and must adapt them to the changeover to and must adapt them to the changeover to the euro: the euro:
analytical review of balances expressed analytical review of balances expressed both in euros and in francs both in euros and in francs
external confirmations to be requested in external confirmations to be requested in euros, francs or both units euros, francs or both units
substantive tests on conversion…substantive tests on conversion…
16
PricewaterhouseCoopers
Impact of euro-related risks on the audit processImpact of euro-related risks on the audit process
A specific testing program should be A specific testing program should be implemented after the changeover date:implemented after the changeover date:
review of the conversion method usedreview of the conversion method used
detailed controls on conversion and detailed controls on conversion and roundingsroundings
conversion of management reporting conversion of management reporting schedulesschedules
Incidence on auditor'sIncidence on auditor'sopinion of inadequateopinion of inadequate
preparation for the europreparation for the euro
PricewaterhouseCoopers
18
PricewaterhouseCoopers
Incidence on auditor's opinion of inadequate Incidence on auditor's opinion of inadequate preparation for the europreparation for the euro
If the statutory auditor considers that the If the statutory auditor considers that the company has not made adequate preparation company has not made adequate preparation for the euro:for the euro:
this situation casts doubts over the ability this situation casts doubts over the ability to remain a going concernto remain a going concern
this situation is not addressed adequately this situation is not addressed adequately in the financial statementsin the financial statements
his report will need to reflect the his report will need to reflect the inadequacy of any such disclosureinadequacy of any such disclosure
19
PricewaterhouseCoopers
Incidence on auditor's opinion of inadequate Incidence on auditor's opinion of inadequate preparation for the europreparation for the euro
In the French context, the CNCC requires the In the French context, the CNCC requires the statutory auditor to:statutory auditor to:
highlight in his report, during the transitional highlight in his report, during the transitional period, scope limitations deriving from:period, scope limitations deriving from:
inadequate implementation of inadequate implementation of procedures designed to prevent risks procedures designed to prevent risks and errorsand errors
inappropriate adaptation of information inappropriate adaptation of information systems to the eurosystems to the euro
qualify his report for uncertainty it there is a qualify his report for uncertainty it there is a going concern issue due to:going concern issue due to:
inadequate preparation for the euroinadequate preparation for the euro
inappropriate information systemsinappropriate information systems
loss in substance of the businessloss in substance of the business
Euro implementation:Euro implementation:top priority fortop priority for
auditors in Franceauditors in France
PricewaterhouseCoopers
21
PricewaterhouseCoopers
Euro implementation: top priority for auditorsEuro implementation: top priority for auditorsin Francein France
In order to be the driving force in the changeover In order to be the driving force in the changeover to the euro, the OEC (Ordre des Experts-to the euro, the OEC (Ordre des Experts-Comptables) has made several tools available to Comptables) has made several tools available to its professionals its professionals
Tools have been developed to assist companies Tools have been developed to assist companies in preparing the changeover:in preparing the changeover:
website dedicated to the euro (website dedicated to the euro (www.www.euroeuro-expert.com-expert.com))
dedicated web site that comprises software dedicated web site that comprises software suppliers' details of euro compliancesuppliers' details of euro compliance
euro diagnostic website euro diagnostic website (www.(www.euroeuro-diagnostic.com)-diagnostic.com) to stimulate management to stimulate management awareness of what's at stakeawareness of what's at stake
22
PricewaterhouseCoopers
Euro implementation: top priority for auditorsEuro implementation: top priority for auditorsin Francein France
Regular information about the introduction of the Regular information about the introduction of the euro has been provided in magazines published euro has been provided in magazines published by the OEC (SIC, …)by the OEC (SIC, …)
A survey will be carried out on selected A survey will be carried out on selected chartered accountants to measure the progress chartered accountants to measure the progress of the changeover to the euro among their of the changeover to the euro among their clientsclients
The CD-rom "Euro start" will assist professionals The CD-rom "Euro start" will assist professionals in managing the changeover to the euro of their in managing the changeover to the euro of their audit filesaudit files
23
PricewaterhouseCoopers
Euro implementation: top priority for auditorsEuro implementation: top priority for auditorsin Francein France
In March 1998, the CNCC (Compagnie In March 1998, the CNCC (Compagnie Nationale des Commissaires aux Comptes) Nationale des Commissaires aux Comptes) issued a practical guide on the euro organised issued a practical guide on the euro organised in three parts: in three parts:
the stakes, mechanisms and the stakes, mechanisms and implementation of the euroimplementation of the euro
the technical consequences of the the technical consequences of the changeover to the eurochangeover to the euro
the impact of the euro on the audit processthe impact of the euro on the audit process
This guide, updated twice since its first This guide, updated twice since its first publication, has been distributed to all French publication, has been distributed to all French auditorsauditors
24
PricewaterhouseCoopers
Euro implementation: top priority for auditorsEuro implementation: top priority for auditorsin Francein France
In addition to their audit engagement, In addition to their audit engagement, statutory auditors must endeavour to inform statutory auditors must endeavour to inform and encourage their clients to prepare the and encourage their clients to prepare the changeover to the euro through:changeover to the euro through:
awareness leafletsawareness leaflets
seminar presentationsseminar presentations
training sessionstraining sessions
25
PricewaterhouseCoopers
Euro implementation: top priority for auditorsEuro implementation: top priority for auditorsin Francein France
Specific assignments can also be conducted:Specific assignments can also be conducted:
analysis of euro-related impacts and risksanalysis of euro-related impacts and risks
assistance in the implementation of euro assistance in the implementation of euro strategiesstrategies
assistance with the management of euro assistance with the management of euro projectproject
adaptation of procedures and internal adaptation of procedures and internal controls to the eurocontrols to the euro
staff training staff training