Third country audit entities

1. Background

The Statutory Audit Directive 2006/43/EC (the ”Audit Directive”), as amended by Directive 2014/56/EU, requires that third country statutory auditors and audit entities (the term ”third country audit entity” refers to both single practitioners and audit firms originating from a third country) providing an audit report concerning the annual or consolidated accounts to companies incorporated outside the European Union/European Economic Area (EU/EEA) whose securities are admitted to trading on an EU-regulated market should be entered in a public register and subject to a level of regulation equivalent to the minimum required for EU auditors and audit entities.

Article 45 of the Audit Directive sets the regulatory framework for registration of third country audit entities, for ongoing oversight including the external monitoring of the quality of their audit work, and for investigations and penalties. In this regard, and according to Article 45 of the Audit Directive, third country audit entities must register with a competent authority in each Member State in which the transferable securities are admitted to trading.

Article 46 of the Audit Directive sets the framework for a possible reliance on a third country oversight system in Europe, subject to reciprocity. Article 46 permits Member States to exempt third country audit entities from these requirements if these entities are subject to a system of public oversight, inspection and investigation that has been recognised as equivalent by the European Commission, or if these entities originate from a third country listed in Commission Implementing Decision (EU) 2016/1223 amending Decision 2011/30/EU on transitional arrangements.

In Sweden, the SIAis the competent authority for registration of third country audit entities.

2. Who must register as third country audit entity in Sweden?

Registration of a third country audit entity with the Inspectorate must be undertaken if the entity audits the annual or consolidated accounts of a company incorporated outside the EU/EEA whose transferable securities are admitted to trading on a regulated market in Sweden.

However, no registration is required if one of the following applies:

the company is an issuer exclusively of debt securities within the meaning of Article 2(1)(b) of Directive 2004/109/EC, prior to 31 December 2010 and, the denomination per unit of which is, at the date of at least EUR 50,000 or, in the case of debt securities denominated in another currency, equivalent, at the date of issue, to at least EUR 50,000;
the company is an issuer exclusively of debt securities within the meaning of Article 2(1)(c) of Directive 2004/109/EC from 31 December 2010 and the denomination per unit is, at the date of issue, at least EUR 100,000 or, in the case of debt securities denominated in another currency, equivalent, at the date of issue, to at least EUR 100,000.
the audit entity performing the audit of a company incorporated outside the EU/EEA is a registered audit entity already approved by the SIA in accordance with the Swedish Auditor’s Act (2001:883) or is approved in accordance with the Audit Directive by another EU competent authority to carry out audits of annual accounts or consolidated accounts.

3. What are the different classes of registration as a third country audit entity?

Third country audit entities are classified in three groups, according to the country in which they are established. The registration requirements and the regulatory regime that apply differ according to the country:

3.1 “Equivalent” Countries

Equivalence is assessed by the European Commission in cooperation with Member States. Pursuant to Article 46 of the Audit Directive, equivalence of third countries' regulatory systems is determined by the European Commission with regard to the comitology procedure provided for in the Audit Directive.

Commission Decision of 19 January 2011 (2011/30/EU) (as amended by Commission Decisions of 13 June 2013 (2013/288/EU), 25 July 2016 (2016/1223/EU) and of 14 July 2016 (2016/1155/EU)) determine that the following countries and territories are equivalent:

In respect of audits of financial statements for periods starting after 2 July 2010:

Australia
Canada
China
Japan
Singapore
South Africa
South Korea
Switzerland
United States of America

In respect of audits of financial statements for periods starting after 31 July 2012:

Abu Dhabi
Brazil
Dubai International Financial Centre
Guernsey
Indonesia
Isle of Man
Jersey
Malaysia
Taiwan
Thailand

In respect of audits of financial statements for periods starting after 31 July 2016:

Mauritius
New Zealand
Turkey

3.2 “Transitional” Countries

Commission Decision of 19 January 2011 (2011/30/EU), as amended by Commission Decision of 25 July 2016 (2016/1223/EU) also exempts, for a transitional period, auditors of companies incorporated in certain third countries from most of the regulatory requirements of Article 45 of the Audit Directive, on the condition that they provide relevant Member States with specific information.

The following are transitional countries in respect of audits of accounts for periods beginning between 2 July 2010 and 31 July 2018.

Bermuda
Cayman Islands
Egypt
Russia

3.3 “Non-equivalent” Countries

Third country audit entities that are established in countries that are neither “equivalent” nor “transitional” are subject to the full requirements of the Article 45 of the Audit Directive.

4. How to apply?

The registration of third country audit entities shall be carried out in each individual Member State. Therefore, the registration of third country audit entities remains necessary in each Member State. These entities still have to apply separately for each registration with the competent oversight authorities.

A third country audit entity that wishes to register with the SIA should apply:

using “Form A”, where the audit entity’s home country has been declared “equivalent” or where the transitional arrangements apply;
using “Form B”, where the full registration requirements of Article 45 apply.

We invite you to read the FAQ in order to help you decide on the type of registration regime that applies to you.

To apply for registration, a third country audit entity must complete and submit the relevant registration forms, including all applicable annexes indicated in the forms. The forms may be completed electronically and sent to the SIA by e-mail to ri@revisorsinpektionen.se These forms must also be signed and sent to the SIA by post.

The SIA will inform the applicant on the approval or rejection of the registration application. The necessary information about the registered entity will be published in the register kept by the SIA.

An application fee is payable on application and if the application is approved a registration fee is levied. On each anniversary of the registration date a registration fee is due. For detailed information on the payment of the registration fees, please refer to the FAQ.