Third-Country Auditors and Third-Country Audit Entities
The EU Statutory Audit Directive (“Directive 2006/43/EC”) requires that auditors and audit entities from third countries providing audit services to companies incorporated outside the European Union/European Economic Area whose transferable securities are admitted to trading on a regulated market in the EU/EEA should be entered on a public register and be subject to a level of regulation equivalent to the minimum required for EU/EEA auditors.
The registration requirements have been implemented in Germany in § 134 of German Public Accountant Act (WPO). In Germany registered third-country auditors and third-county audit entities can be seen on the Public Register / Register of Statutory Auditors.
Since 1 February 2020, the United Kingdom is no longer a member of the European Union. However, due to the withdrawal agreement, the United Kingdom was still considered a member state of the European Union until 31 December 2020, and consequently British auditors were considered EU auditors.
Since 1 January 2021, the rights and obligations between the European Union and the United Kingdom have been determined by the Trade and Cooperation Agreement of 25 December 2020 (PDF) (EU-UK Trade and Cooperation Agreement).
This agreement does not regulate auditors, but merely summarises the various national regulations (measures) and, if applicable, reservations for future regulations (reservations).
Thus, as of 1 January 2021, UK auditors are no longer EU auditors but instead are regarded as third-country auditors, and UK audit firms are deemed third-country audit firms.
Registration of UK auditors and audit firms with the WPK
Auditors and audit firms of the UK that audit companies related to the regulated capital market in Germany must register with the German Chamber of Public Accountants as third-country auditors and third-country audit firms (§ 134 WPO). The possibility of third-country auditor registration is referred to in the EU-UK Trade and Cooperation Agreement (see ANNEX SERVIN-1: EXISTING MEASURES, Schedule of the Union, Reservation No. 2 - Professional services (except health-related professions), (d) Auditing services, p. 565). The German Chamber of Public Accountants has already recognised the equivalence of professional rules.
Exemption for the legal representation of a German audit firm
UK auditors who were as EU auditors entitled to participate in audit firms without further admission and were entitled to legal representation, can now no longer be partners and legal representatives of a German audit firm. They can apply for an exemption for the legal representation of a German audit firm (paragraph 28 (3) WPO). Subject to the authorisation of the WPK, they can be minority shareholders of a German audit firm.
Without such an exemption, they have to leave the company. For this purpose, the company may be granted an adjustment period of up to three years.
Registration of German auditors and audit firms with the FRC
German auditors and German audit firms auditing companies related to the regulated capital market in the United Kingdom have to register there with the Financial Reporting Council (FRC) as third-country auditors or third-country audit firms. The FRC has already confirmed to the WPK that the German professional rules are regarded as equivalent which is required for this registration. The FRC has compiled information on registration (PDF).
Waiver of registration due to equivalence of professional rules?
It remains to be clarified whether the United Kingdom, regarding the aforementioned already assessed equivalence of professional rules, will waive the registration for German auditors and audit firms subject to reciprocity.
Lastly, the United Kingdom has reserved the right in the EU-UK Trade and Cooperation Agreement to allow third-country auditors and third-country audit firms to work as statutory auditors in the United Kingdom, subject to the equivalence of professional rights and reciprocity (see ANNEX SERVIN-1: EXISTING MEASURES, Schedule of the United Kingdom, Reservation No. 2 - Professional services (all professions except health-related) (b) Auditing services, p. 644). The details remain to be clarified, as well.
You can find further information on registration procedure in the document provided below. Please use Form B for the registration.
Form A can only be used by a third-country audit entity whose home country is one of the third countries to which the European Commission has granted a transitional period in accordance with Article 46 (2) of the Directive 2006/43/EC in the following decisions:
- 2008/627/EC of 29 July 2008
- 2011/30/EU of 19 January 2011
- 2013/288/EU of 13 June 2013
- 2016/1223/EU of 25 July 2016
The following are transitional countries in respect of audits of accounts for periods beginning between 2 July 2010 and 31 July 2018:
- Cayman Islands