The European Commission has decided to refer Croatia to the Court of Justice of the EU for failing to fully enact European rules on audit in its national legal system. A timely and correct implementation of the Audit Directive is an important step to reinforce and strengthen EU legislation on statutory audit, as it addresses a number of shortcomings observed in the audit market during the last crisis.
Croatia’s failure to implement the Directive currently prevents stakeholders, such as investors and shareholders, from benefitting from the new rules which considerably improve audit quality. It also has a detrimental effect on the orderly functioning of national and EU markets. In addition, there are concerns on the reliability and trustworthiness of Croatia’s national framework as the enhanced requirements for independence and objectivity contained in the Directive have not been implemented.
The Audit Directive – which amends the previous Audit Directive (Directive 2006/43/EC) – lays down the conditions for the approval and registration of persons that carry out statutory audits. It also sets out the rules on independence, objectivity and professional ethics applying to those persons and the framework for their public oversight.
A statutory audit is a legally-required review of financial records. The role of a statutory audit is to certify the financial statements of companies or public entities.
