8 August 2022

Second Amendment of the Professional Charter for Professional Accountants in Public Practice

Following its original version in 2016, the Professional Charter for Professional Accountants in Public Practice (BS WP/vBP) has been amended for the second time by means of a resolution of the advisory board of 3 June 2022. After approval by the Federal Ministry for Economic Affairs and Climate Action (BMWK, Article 57 para. 3b sentence 1 Auditors’ Code), the amendments entered into force on 29 June 2022 (“Neu auf” of 28 June 2022 (in German)).

Reasons for the Amendments

The need to amend the Professional Code arose from the amendments to national statute law, primarily through the Financial Market Integrity Strengthening Act (FISG, entered into force on 1 July 2021), in addition also through the Act Modernising Notarial Professional Law and Amending Other Provisions (entered into force on 1 August 2021) and the Act to Promote Consumer-Oriented Offers in the Legal Services Market (entered into force on 1 October 2021).

The Amendments in Detail

Article 2 PC WP/vBP (Independence)

As a result of the Act to Promote Consumer-Oriented Offers in the Legal Services Market, Article 55a Auditors’ Code was amended to performance fees for tax legal assistance. In Article 55a para. 2 Auditors’ Code, the words “due to his economic circumstances” have been deleted and the fundamental prohibition on agreeing performance fees in the area of tax legal assistance has thus been further loosened. This amendment was completed with a corresponding deletion in Article 2 para. 2 No. 2 PC WP/vBP, which has identical wording.

Article 31 PC WP/vBP (Meaning of Absolute Reasons for Exclusion within the meaning of Articles 319 ff. German Commercial Code)

Article 31 para. 4 PC WP/vBP old version had transposed the circumstances of Article 319a German Commercial Code old version into professional law and, by defining the general clause of Article 49 Alt. 2 Auditors’ Code (Refusal of the Work), has standardised a concurrent professional law ban on work for audits in public-interest entities.

Article 319a German Commercial Code has been repealed by the FISG. Since the statutory connecting factor for Article 31 para. 4 PC WP/vBP has thus lapsed, the most recently mentioned regulation also had to be repealed.

Article 33 PC WP/vBP (Self-Audit)

Paragraphs 7 and 8 sentences 1 and 2 of Article 33 PC WP/vBP old version contained regulations on the ban on self-audits when auditing public-interest entities, which corresponded to Article 319a para. 1 sentence 1 No. 2 and 3 German Commercial Code old version in terms of content. As a result of the repealing of Article 319a German Commercial Code by the FISG, these regulations also had to be deleted.

Articles 48, 60 PC WP/vBP (Measures for Job-Related Quality Assurance)

The FISG moved the definition of public-interest entities from Article 319a German Commercial Code to a new Article 316a sentence 2 German Commercial Code. Since the old legal definition was used in Articles 48 para. 4, 60 para. 2 PC WP/vBP old version (“Public-interest entities according to Article 319a para. 1 sentence 1 German Commercial Code” or “Companies according to Article 319a para. 1 sentence 1 German Commercial Code”), these regulations had to be editorially adjusted.

Article 65 PC WP/vBP old version (Publication)

Due to the Act Modernising Notarial Professional Law and Amending Other Provisions, a new sentence 5 has been added to Article 57 para. 3b WPO. This provides for publication of the Professional Code and its amendments on the WPK website.

The provision of Article 65 PC WP/vBP old version deviating from this, according to which the Professional Code and its amendments had to be published in the Federal Gazette, therefore had to be repealed.

Article 66 PC WP/vBP old version (Entry into Force, Abrogation)

Article 66 sentence 1 PC WP/vBP old version on the entry into force of the newly written Professional Code of 21 June 2016 merely replicated the wording of Article 57 para. 3 sentence 2 Auditors’ Code old version, which has since been repealed. As a consequence, the regulation did not have any inherent regulatory content and, furthermore, had become obsolete, meaning that it could also be repealed.

Article 66 sentence 2 PC WP/vBP old version on abrogation of the Professional Code of 11 June 1996 could also be repealed because the regulation had fulfilled its purpose with the entry into force of the newly written Professional Code on 23 September 2016.

Proportionality Test according to Article 57 para. 3a Auditors’ Code?

Under Article 57 para. 3a Auditors’ Code, the WPK must examine new Professional Code regulations or regulations to be amended for proportionality on the basis of the criteria in Articles 5 to 7 of the Proportionality Directive (Directive [EU] 2018/958). Within the context of the approval procedure, the documents in which compliance with the requirements of the Proportionality Directive can be seen, must be submitted to the BMWK. In particular, the reasons on the basis of which the advisory council of the WPK has justified the Code or its amendments are justified, necessary and proportionate must be listed (Article 57 para. 3b Auditors’ Code).

A proportionality test presupposes an intervention in the members’ civil liberties. Only such an intervention ensures that the goal pursued by the new or amended regulation can be examined for its proportionality. However, the amendments to statutes decided by the advisory council are limited to the mandatory adoption of legislative changes and associated deletions (Articles 2, 31, 33 PC WP/vBP), editorial adaptations (Articles 48, 60 PC WP/vBP) and other deletions (Articles 65, 66 PC WP/vBP old version). They therefore do not qualify as interventions overall. A proportionality check according to Article 57 para. 3a Auditors’ Code did not need to be carried out in the view of the BMWK.

Digression: Critical Basic Attitude (Article 37 PC WP/vBP)

There is also need for adaptation with respect to Article 37 PC WP/vBP because the key elements of the critical basic attitude were located in Article 43 para. 4 sentences 2 and 3 Auditors’ Code with the FISG. The new number 2 of Article 43 para. 4 sentence 2 Auditors’ Code takes on the wording in Article 21 para. 2 clause 1 of the Audit Directive. Article 37 sentence 3 PC WP/vBP contains a comparable regulation. The new Article 43 para. 4 sentence 3 Auditors’ Code, which governs specific circumstances, in which the critical basic attitude plays a special role, has been taken over from Article 21 para. 2 clause 2 Audit Directive with identical wording.

The Board proposed to the advisory council that Article 37 PC WP/vBP be abridged where there are otherwise duplicated regulations with the supplemented statutory regulation. Otherwise, the text of the code should refer to the detailed regulations now in the Auditors’ Code. In the sentence to be retained concerning the critical questioning of the audit evidence obtained, the term “credibility” should be replaced by the stronger and appropriate term of “persuasiveness” and “appropriateness” by “suitability”. The aim of these proposed amendments was also to adapt the terminology used within Article 37 PC WP/vBP to the language use of the International Auditing Standards translated into German by the IDW (“ISA-DE”), where, in connection with obtaining sufficient audit evidence, the term “appropriate” is no longer used, but where “suitable” audit evidence that has to be “persuasive” is talked about. The term “reliability” should continue to be used because it is still used in the Auditing Standards. The triad of these terms (“persuasiveness, suitability, reliability”) was intended to give members further assistance in how to critically assess audit evidence and Article 43 para. 4 sentence 2 No. 4 Auditors’ Code is thus substantiated.

However, the advisory council did not decide on the amendment of Article 37 PC WP/vBP proposed by the Board in its meeting on 3 June 2022 because the required two-thirds majority was not achieved (see Report on the Meeting of the WPK Advisory Council on 3 June 2022, “Neu auf” of 17 June 2022 (in German)). The adaptation of the regulation to Article 43 para. 4 Auditors’ Code amended by the FISG is therefore still pending.