Country FRANCE 1. Organization Haut Conseil du Commissariat aux Comptes (H3C) / High Council for Statutory Audit The H3C is a high-level independent public authority, created by the Loi de Sécurité Financière (Financial Security Law) on 1 st August 2003, with direct links to the Minister of Justice. The role and responsibilities of the H3C over the audit profession in France are defined and set out by law and decree in the Code de commerce (Commercial Code). The two main tasks in the oversight role of the H3C are: i) To supervise the statutory audit profession, with the assistance of the Compagnie nationale des commissaries aux comptes (CNCC national professional body of statutory auditors), and ii) To ensure compliance with the French Professional Code of Ethics and of the independence of statutory auditors. The H3C s responsibilities cover the following areas: (in no specific order) Auditing, audit-related standards and professional best practices; Ethics and deontology; Inspections; International; Registration; and Disciplinary As of December 31, 2013, there are 50 employees working for the H3C in Paris. Page 1 of 8
2. Board Composition and Members Describe the current composition of the Board and the requirements for the Board members The H3C Board is composed of twelve members for six-year terms. The composition requirements are set out in Article L. 821-3 of the Commercial Code: Composition as set out in Article L. 821-3 of the Commercial Code: Three magistrates: - a member (current/former) from the Cour de cassation (French Supreme Court) (who chairs the Haut Conseil), - a member from the Cour des comptes (in charge of auditing public accounts) and - a second member from the judicial body Appointed by decree (published in the Official Journal of the French Republic) - Mme Christine THIN (Chair) - Mr. Guy PIOLÉ - Mr. Jean-Pierre ZANOTO (Vice-Chair) The Chairman of the Autorité des marchés financiers (AMF - French Financial Markets Authority) or his representative The Director-General of the Treasury Department of the Ministry of Finance or his representative A university professor specialized in legal, economic or financial matters Three individuals with expertise in economic and financial matters; - two experts in the area of public offerings and of companies whose securities are admitted to trading on a regulated market, - the third expert with specialized knowledge on SMEs and non-profit associations Three statutory auditors; - two with experience in statutory audits of public offering entities or companies, or that appeal to public generosity - Mr. Bernard CASTAGNÈDE - Mr. Jacques ETHEVENIN - Mr. Philippe CHRISTELLE - Ms. Caroline WEBER - Mr. Antoine MERCIER (Retired) - Ms. Sylvie PERRIN - Ms. Catherine SABOURET (Retired) A Government Commissioner, appointed by the Minister of Justice, also sits on the Board with non-voting consultative powers and doesn t take part in disciplinary hearings. The current Government Commissioner is the Director of Civil Affairs, Ms. Carole CHAMPALAUNE. The Secretary General The H3C Secretary General is appointed by the Minister of Justice. The current Secretary General is Mr. Philippe STEING, a high-level magistrate. Page 2 of 8
Are the majority of the governing body non-practitioners: Yes 3. Funding Arrangements Describe the main funding arrangements, including the setting and approval of the budget and the fees, if any. The H3C has been financially autonomous since 2009. The funding arrangements of the H3C, as well as the fee levels, are set out under Art. L821-5 of the Commercial Code which provide that fixed and proportional levies are to be collected from the audit profession. The budget is set and adopted by the H3C Board on the basis of a proposal from the Secretary General. Is the funding free from undue influence by the profession? fixed by virtue of law and decree Yes, as the fee levels are Page 3 of 8
4. Inspection System Describe whether inspections are performed by the Member body, or, whether or not in part, by any other organization. If so, also describe the arrangements for overseeing these inspections: Describe the requirements and practices regarding the frequency of inspections: All inspections are under the responsibility of the H3C. Inspections of statutory auditors and audit firms of public interest entities (PIE) are carried out by a H3C body of full-time inspectors, headed by a director under the overall responsibility of the Secretary General. It is also provided by French law that the H3C Secretary General may directly participate in inspections. Certain inspections of non-risky PIE audit firms and areas may be carried out by the CNCC on behalf and under the close supervision of the H3C. Inspections of statutory auditors and audit firms of non-pies are carried out by the CNCC and CRCC (regional professional body of statutory auditors) under the supervision of the H3C. The 6 largest audit networks operating in France are inspected on an annual basis. Other PIE audit firms are inspected every three years, and non-pie audit firms are inspected every six years. The general results of inspections conducted throughout the year (for PIE and non-pie audits) are assessed by the H3C Board, based on reports established by the Secretary General and the CNCC (for non-pie audit firm inspections). The H3C Secretary General may issue individual recommendations for remedial action by statutory auditors and audit firms. The individual audit firm inspection reports are not publicly available. Disciplinary proceedings may be initiated through regional disciplinary chambers by the professional bodies, the AMF or the Public Prosecutor. The Chairman of the AMF and the H3C Secretary General may refer disciplinary cases to the Public Prosecutor. An annual report on the general activities of the H3C (which includes the overall results of inspections and may contain general recommendations by the H3C Board) is published in French and publicly available in printed copy and via the H3C website (www.h3c.org). A digested version of the H3C annual report is now available in English Do you have responsibility for recurring inspections of audit firms undertaking audits of public interest entities? YES. SEE ABOVE. Is this responsibility directly or through oversight of inspection undertaken by professional bodies? BOTH. SEE ABOVE. Page 4 of 8
5. Audit and Financial Market Describe the number of audit firms subject to inspections. Include an indication of the number of public interest audits and other audits in the jurisdiction. Please give some indication of the size and market share of each of the largest audit firms: Number of audit firms to be inspected : 6,931 (of which 599 are PIE firms and 6,322 are non-pie firms) Number of public interest audit engagements : Kindly refer to the Annex below. 6. Main Other Tasks Performed by Member Describe whether the Member also performs other tasks, such as registration, education, standard setting and enforcement in the area of auditing, or other supervisory tasks, such as supervision of financial reporting or securities regulation: Registration and Disciplinary The H3C is the appellate authority for first-level decisions on registration and disciplinary matters taken by the regional registration commissions and regional disciplinary chambers respectively. Auditing and Professional Practice Standards The H3C issues opinions on auditing and audit-related standards developed by the CNCC before the standards may be officially approved by the Minister of Justice. Ethics The H3C issues opinions on the Code of Ethics, where relevant, and on any questions raised on specific professional situations, including for individual cases, in relation with the French legal framework on independence and the Code of Ethics. Other audit supervisory matters The H3C may also be called upon to provide its input and comments on various auditrelated matters, including on draft legal texts with regards audit supervision. Page 5 of 8
7. Other Information Include relevant contact information, including postal address, telephone numbers, a link to the website and other relevant information. H3C Website: www.h3c.org Address: Haut Conseil du Commissariat aux Comptes (H3C) 10 rue Auber 75009 Paris FRANCE Fax: +33 1 44 51 09 35 Contact Persons : Philippe STEING Melissa ANDRADE GOMES TEL: (33) 1 44 51 09 38 TEL: (33) 1 44 51 08 85 Email: philippe.steing@h3c.org Email: melissa.andrade-gomes@h3c.org Page 6 of 8
8. Major Events and Activities of 2013 Include the major events and activities that have taken place during the past years: 18 January 2013: H3C enters into a cooperation agreement with the Federal Audit Oversight Authority (FAOA) of Switzerland 31 January 2013: H3C enters into a cooperation agreement with the US Public Company Accounting Oversight Board (PCAOB) 8 February 2013: H3C Board adopts the 2013 inspection program 14 May 2013: H3C signs an agreement with the government of New Caledonia on the modalities in which the H3C will assist in the supervision of statutory auditors 16 May 2013: H3C publishes the 2013 annual work program 6 June 2013: H3C enters into a cooperation agreement with the Canadian Public Accountability Board (CPAB) 23 July 2013: H3C publishes its 2012 Annual Report 14 August 2013: H3C extends the duration of cooperation arrangements with US Public Company Accounting Oversight Board (PCAOB) 21 November 2013: H3C issues an opinion on the possibility to call upon the assistance of a fellow statutory auditor in the performance under his responsibility of internal quality control reviews 2 December 2013: H3C issues a statement relating to the European Central Bank assessment of the risk and quality of bank assets, as well as stress tests, to be performed by the end of 2014 on major European banks, to remind statutory auditors that such engagements must comply with French audit-related standards and the French Code of Ethics which prohibit notably any consulting services and situations of self-review. 13 December 2013: H3C issues a statement to suspend the application of a recommendation relating to best practices on mandatory rotation of statutory auditor in light of the European audit reforms 17 December 2013: H3C announces its participation in the EAIG Inspection Database to collect and exchange inspection results on the 10 largest European audit networks with 27 European national audit regulators 26 December 2013: H3C issues an opinion in favour for the adoption of the auditrelated standard on services that may be provided by the statutory auditor regarding social and environmental responsibility Page 7 of 8
ANNEX Analysis of the number of PIE engagements* held by all PIE audit firms PIE Regulated markets 974 27% PIE Non-regulated markets 2 654 73% Credit institutions 985 Mutual companies (Book II) 633 Insurance companies 404 Charities and non-profit associations 495 Non-profit provident institutions or other 137 Total 3 628 100% * Kindly note that the figures shown in this Annex are as declared on an annual basis by the French auditor population, and include joint audits, meaning that one audit engagement can be held by two audit firms. Page 8 of 8