Amendments for auditors, supervisory boards and capital markets-oriented companies
Several accounting scandals in the recent past caused the EC to adopt both the Directive 2006/43/EC (Statutory Audit Directive) and Directive 2006/46/EC (Company Reporting Directive). The directives will improve the credibility of financial information and strengthen protection against financial scandals. These directives will be implemented in Austria with the legislative proposal for a Business Law Amendment Act 2008 (Unternehmensrechts-Aenderungsgesetz 2008, "URAeG 2008"). The amendments will be applicable for business years starting after 31 December 2008. However, some of the amendments will be in effect by 1 June 2008.
Amendments for Auditors
According to the URAeG 2008, the duties of statutory auditors will be stipulated more precisely and the requirements for the statutory auditors´ independence will be strengthened. In particular, the group auditor will bear full responsibility for the audit report in the case of consolidated accounts.
Statutory auditors of capital market-oriented companies and companies with a balance sheet total of more than Euro 96.25 million or more than Euro 192.5 million turnover may not become board members or assume key management positions with the audit client before the end of a two-year cooling-off period. This will ensure that "complaisant" statutory auditors will not be rewarded with highly endowed positions.
In order to reinforce the independence of auditors of public interest entities, the Company Reporting Directive stipulates that the key audit partner auditing such entities should rotate. To organise such rotation, the Business Law Act (Unternehmensgesetzbuch, "UGB") requires a change of the key audit partner dealing with an audited entity, while allowing the audit firm with which the key audit partner is associated to continue as the statutory auditor of such entity. Respective provisions have already been implemented in Austria in 2005.
As before, many companies will have an audit committee to minimise financial, operational and compliance risks and to enhance the quality of financial reporting. This obligation will be extended to companies not yet covered: capital market-oriented companies and companies with a balance sheet total of more than Euro 96.25 million or more than Euro 192.5 million turnover.
The responsibilities of the audit committee will be expanded as well. In the future, the audit committee will, in particular, monitor the financial reporting process, the company´s internal control and risk management system, the statutory audit of the annual and consolidated accounts as well as the independence of the statutory auditor. Due to the fact that these duties demand consolidated knowledge of financial concerns, one member of the audit committee will have competence in accounting and reporting ("financial expert").
... and Capital Markets-oriented Companies
As before, limited liability companies and joint stock companies must establish an internal control system that meets with the requirements of the business. In the future, capital markets-oriented companies will include a corporate governance statement in its annual report that contains a description of the main features of this internal control and risk management system in relation to the financial reporting process. For this reason, the annual report is significantly expanded, but does not reach the dimension of the Sarbanes Oxley Act.
According to the URAeG 2008, companies listed on stock exchanges must draw up corporate governance reports. These reports should contain information about the corporate governance practices applied beyond the requirements under national law as well as further information about corporate governance rules.
...Further Important Amendments...
In addition, the URAeG 2008 provides for some disclosure requirements. For example, certain transactions with parties related to the company will be outlined in the notes of the accounts. Material off-balance-sheets arrangements must be outlined in the notes of the accounts as well. This will prevent, in particular, the transfer of debts to special purpose entities and thus, will avoid that certain debts are not accounted for in an Austrian balance sheet. Finally, inter alia, the total fees for the financial year charged by the statutory auditor for the statutory audit of annual accounts will be outlined in the notes of the accounts.
In Austria, the Business Law Act provides for certain reliefs for small and medium-sized companies. An increase in the thresholds for these amount-dependent reliefs as well as extension of the reliefs will lead to a reduction of administration costs for companies in the amount of approximately Euro 20 million.
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