1. Slide 1 Accounting Education Requirements and Implementation of the EU Directive on Statutory Audit Wim Moleveld Education Subgroup of the Liberalization/Qualification Working Party European Federation of Accountants ROAD TO EUROPE – PROGRAM OF ACCOUNTING REPORTING AND INSTITUTIONAL STRENGTHENING

2. Slide 2 AGENDA 1.Requirements: - educational qualifications (art. 6) - examination of professional competence (art. 7) - test of theoretical knowledge (art. 8) - practical training (art. 10) - continuous education (art. 13) 2.Implementation: - education policy - programme of theoretical instruction - practical training 3.Observations and Conclusions

3. Slide 3 Communication on Reinforcing the Statutory Audit in the EU, 15 May 2003: “To ensure the continued relevance of the educational requirements, the contents of the curriculum should be assessed against relevant developments in business practice and financial reporting (e.g. the IAS Regulation), taking account of international research and developments. Such an assessment should draw upon international education guidelines such as IFAC’s International Education Standards for Professional Accountants” :

4. Slide 4 Requirements  Statutory Audit Directive includes qualification requirements for natural persons to be approved to carry out statutory audits: article 6 – 12  IFAC: Exposure Draft Competence Requirements for Audit Professionals  Statutory Audit Directive includes a new requirement on continued education: article 13  IFAC: Continuing Professional Development: A Program of Lifelong Learning and Continuing Development of Professional Competence

5. Slide 5 Requirements educational qualifications (art 6) “ (…) a natural person may be approved to carry out a statutory audit only after having attained university entrance or equivalent level, then completed a course of theoretical instruction, undergone practical training and passed an examination of professional competence of university final or equivalent examination level, organized or recognized by the Member State concerned.”

6. Slide 6 What means: “university final or equivalent examination level”?  FEE suggested coordination with the developments resulting from the Bologna Declaration of European Education Ministers, as follows: “The learning and assessment must be at a level at least equivalent to a three-year university first degree; significant parts of the learning and assessment will be at second-degree level i.e. equivalent to more than a three-year university first degree.”  Equivalent level: Dublin descriptors offer a basis for demonstrating the level of education and assessment, regarding the aspects of: knowledge and understanding; applying knowledge and understanding; making judgements; communication; learning skills.

7. Slide 7 Relevant differences between first-degree level and second-degree level Example: Making judgements:  First-degree level( bachelor): ability to gather and interpret relevant data …  Second-degree level (master) : ability to integrate knowledge and handle complexity, and formulate judgements with incomplete or limited information …

8. Slide 8 Requirements examination of professional competence (art 7)  “The examination of professional competence referred to in Article 6 shall guarantee the necessary level of theoretical knowledge of subjects relevant to statutory audit and the ability to apply such knowledge in practice. Part at least of that examination must be written.”  IFAC: Assessment of professional capabilities and competence (IES 6)

9. Slide 9 Requirements test of theoretical knowledge (art 8) “ Test of theoretical knowledge…shall cover the following subjects in particular: …followed by a list of subjects… …it shall also cover at least the following subjects in so far as they are relevant to auditing: …followed by a list of subjects… The Commission may … adapt the list of subjects… The Commission will take into account the developments in auditing and the audit profession…”

10. Slide 10 New subjects in test of theoretical knowledge The Statutory Audit Directive added to the list of subjects in the 8th Directive:  International accounting standards  International auditing standards  Professional skills  Professional ethics and independence  Corporate governance FEE suggested also:  Assurance engagement concepts  Business valuations  International business and globalisation

11. Slide 11 Requirements practical training (art 10)  “In order to ensure the ability to apply theoretical knowledge in practice, a test of which is included in the examination, a trainee shall complete a minimum of three years practical training (...)”  IFAC: Practical experience requirements (IES 5): “the period of practical experience should be a minimum of three years”

12. Slide 12 Requirements continuous education (art 13)  “statutory auditors are subject to appropriate programmes of continuous education …”  IFAC: Continuing Professional Development (IES 7): input-based approach: - complete at least 120 hours or equivalent learning units in each rolling three-year period - complete at least 20 hours or equivalent learning units in each year

13. Slide 13 Implementation  The regulatory body and/or professional body define the Education Policy  The education institutes (professional body and/or universities) define the Education Programme

14. Slide 14 Implementation Education policy  Regulatory framework  Scope and objectives  Responsibilities and organisation  Required competences and skills  Subjects of the theoretical instruction and indication of the quantitative aspects (ects, hours)  Conditions practical training (training environment, qualification trainer, duration, assessment)

15. Slide 15 Implementation Programme of theoretical instruction  Learning outcomes  Knowledge base  Education methodology  Assessment methods

16. Slide 16 Implementation practical training  Programme of actions  Recording of activities  Observations by trainer  Supervision and assessment

17. Slide 17 Observations and Conclusions  The new EU Directive on Statutory Audit contains basically similar qualification requirements as under the Eighth Directive.  European Commission may further adapt the subjects in article 8 as the developments may require.  Proper implementation of the education requirements starts by defining national policy on accounting education and allocation of responsibilities by national regulators.  Universities’ independence and autonomy must ensure that education continuously adapt to changing needs.  FEE wants to contribute to the advancement of accounting education in Europe by enhancing compliance with the relevant EU directives and by promoting the international standards.