Safeguarding the independence of auditors by limiting non-audit services

Prohibited non-audit services (NAS)

The reform introduces a list of prohibited non-audit services (NAS). Member States have the option either to expand the EU baseline list of NAS, or they may permit certain tax and valuation services under specific circumstances. The new prohibitions will apply to the first financial year starting after 17 June 2016, and will affect not only the incoming auditor of the PIE itself, but also any member of the auditor’s network that provides services either to the audited entity, its parent undertaking(s) or its controlled undertakings within the EU.

Permitted non-audit services

There are certain non-audit services that are not explicitly forbidden by the European legislation. However, the reform foresees, nonetheless, a restriction on these services if they are to be carried out by the auditor of the same undertaking. The reform stipulates that the fees for permitted NAS cannot exceed 70% of the average statutory audit fees for the previous three years. Further guidance on the cap can be expected to be found within national legislation.

For more information on prohibited NAS and the cap on permitted NAS, please consult our Factsheet.