The PRA has published Consultation Paper 34/15: Implementing audit committee requirements under the revised Statutory Audit Directive (CP34/15).
CP34/15 sets out the PRA’s proposed rules to implement the audit committee requirements of article 39 of the Statutory Audit Directive (as amended by Directive 2014/56/EU), which sets out requirements on audit committee composition and the functions that audit committees should perform.
In CP34/15 the PRA proposes, amongst other things:
- to apply the requirements in a proportionate manner, with the most significant and complex firms being subject to the highest standards;
- to generally require audit committees for: (i) Capital Requirements Directive credit institutions; (ii) Solvency II insurers, the Society of Lloyd’s and managing agents; and (iii) UK designated investment firms;
- that the audit committee must be a sub-committee of the board;
- that the audit committee of a significant firm should consist entirely of independent non-executive directors (independent NEDs). For other firms (lower impact firms), the PRA proposes that the audit committees must consist entirely of NEDs provided that a majority, and the chairman, are independent NEDs; and
- that the audit committee must carry out the responsibilities prescribed by article 39 of the Statutory Audit Directive. In addition, the PRA proposes that the audit committee of a lower impact firm is allowed to be combined with, and carry out the functions of, the risk committee.
The deadline for comments to CP34/15 is 18 December 2015. The PRA will consider the feedback received and will publish a Policy Statement in Q2 2016.
View Implementing audit committee requirements under the revised Statutory Audit Directive – CP34/15, 18 September 2015