Financial control of the National Insurance Employees Association

Financial control of the National Insurance Employees Association

On 21 September 2020, Greek Member of the European Parliament (MEP) Maria Spyraki of the Group of the European People’s Party, filed a written parliamentary question to the European Commission:

“Greece’s National Insurance Employees Association recently filed a complaint arguing that the company auditing it also provides consulting services to its intended buyer. In fact, in the context of its audit, the company proposed changes to the association, including an increase in its required reserves, which of course resulted in a loss of profitability. Simultaneously auditing the seller and acting as a consultant to the buyer constitutes a breach of ethics, as full access to all of the association’s financial and production data would allow the consultant to influence the valuation of a non-listed company such as the National Insurance Employees Association.

In view of this:

1. What is the Commission’s view of the same company simultaneously auditing and acting as a consultant to two parties involved in a single sale?

2. How does the European legal framework ensure that financial data is audited transparently and that there is no distortion of competition within the European Union?

On 8 January 2021, Financial services, financial stability and Capital Markets Union Commissioner Mairead McGuinness, responded on behalf of the European Commission stating:

 “EU audit legislation sets out general rules for statutory audits of public-interest entities, including insurance undertakings, to improve the independence and objectivity of statutory audit firms and auditors from the audited entity. This is important to avoid conflicts of interests, promote professional scepticism, and safeguard confidentiality and professional secrecy. EU audit rules include a list of prohibited non-audit services and require that statutory auditors and audit firms be subject to appropriate oversight by national competent authorities. EU audit rules do not specifically prohibit that statutory auditors provide different services to two parties in a transaction. It is a matter for the Greek authorities to determine whether, in this specific case, the accountancy firm has violated any national rules or ethical standards.

Auditors must be independent of audited entities and they must carry out statutory audits in compliance with national auditing standards, procedures or requirements. The Commission is conscious of the high concentration in the audit market and of the issues related thereto. It intends to publish its second market monitoring report in early 2021. Furthermore, the Commission is launching a study to assess the impact of the EU audit legislation.”


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