An indicative list includes: capital market Law 4374/2016 “Adjustment of Greek legislation: a) to the provisions of Directive 2013/50/EU of the European Parliament and of the Council dated 22 October 2013, and b) to article 1 of Directive 2014/51/EU of the European Parliament and of the Council dated 16 April 2014 and other provisions” (Government Gazette A’ 50 / 1.4.2016) and Law 3556/2007 “Transparency requirements regarding information on issuers whose securities have been admitted to trading on a regulated market and other provisions” (Directive 2013 / 50 / EU of the European Communities and S 22/10/2013) (Government Gazette A’ 91 / 30.4.2007) regarding in general the transparency of the financial information provided by the issuers whose securities are listed and traded on the Athens Stock Exchange.
Also, Law 3016/2002 “On corporate governance, board remuneration and other issues” (Government Gazette A’ 110 / 17.5.2002) introduces law rules in the implementation of corporate governance framework by Public Interest Entities (mainly companies listed on the Athens Stock Exchange, banks and insurance companies) and complements Article 44 of Law 4449/2017 regarding the audit committees in aforementioned entities.
The legal framework of corporate governance, especially for insurance and reinsurance companies, is significantly strengthened by Law 4364/2013 “Adaptation of Greek legislation to Directive 2009/138/EC of the European Parliament and of the Council of 25 November
2009 on the taking-up and pursuit of the business of insurance and reinsurance (Solvency II)” (Government Gazette A’ 13 / 5.2.2016). Respectively, corporate governance in banking institutions is regulated by a significant number of Acts of the Governor of the Bank of
Greece, the most significant of which is: PD / TCG 2577 / 9.3.2006 “Operation principles and assessment criteria for the organization and internal control systems of credit and financial institutions and their managing officers’ respective functions.”
As far as company law is concerned, apart from the Law on Societes Anonymes, two other basic instruments should be mentioned: Law 4541/2018 for the “Amendment of Law 3190/1955 on Limited Liability Companies and other provisions” (Government Gazette A’ 93 / 31.5.2018) and Law 4072/2012 “Improvement of Business Environment - New Corporate Form – Trade Marks - Real Estate Agents- Regulation on Maritime Affairs, Ports and Fisheries and other Provisions” (Government Gazette A 86 / 11.4.2012).
It is worth noting that, as explicitly stated in Article 1 of Law 4308/2014, in Greece, public interest entities prepare their statutory financial statements in accordance with the International Financial Reporting Standards (IFRS) as approved by the European Union. Other, nonpublic entities prepare their financial statements in accordance with the Greek Accounting Standards (Greek GAAP), which are provided for in Law 4308/2014.
As mentioned, the legislation on accounting and auditing of statutory financial statements in Greece, apart from the aforementioned, also includes a significant number of relevant laws and regulations, which lie beyond the scope of the present paper.
The harmonization of Greek accounting law with EU legislation
Greek accounting law is to a great extent in harmony with that of the European Union. Since the 1980s, rules and regulations included in the two basic EU directives on the basic principles of the accounting framework and the preparation of stand-alone (or annual) and consolidated financial statements have been incorporated into national legislation.
In particular, the accounting rules of the European Union adopted by the “Fourth” Directive 78/660 / EEC of 25.7.1998 “On the annual accounts of certain types of companies” and the “Seventh” Directive 83/349 / EEC of 13.6. 1983 “Consolidated accounts of companies with
limited liability” were incorporated into Greek law, modifying significantly the existing Law 2190/1920 for Societe Anonyme, with Presidential Decree 409/1986 and Presidential Decree 498/1987. These amendments were extended to Law 3190/1955 for limited liability companies, but were also recently incorporated into Law 4072/2012 for private capital companies.
Furthermore, the European Union Directives on the adoption of International Financial Reporting Standards by Member States contained in Regulation EC 1606/2002 of 19.7.2002 “On the Application of International Accounting Standards” have been fully incorporated into Greek law. In particular, the mandatory adoption of International Financial Reporting Standards for the preparation of stand-alone and consolidated financial statements of Member States’ companies with securities listed and traded on stock exchanges is incorporated into Greek law by Law 3229/2004 “Supervision of private insurance, supervision and control of games of chance, application of the International Accounting Standards, and other provisions” (Government Gazette A’ 38 / 10.2.2004), which led to the addition of Chapter 15 to Law 2190/1920 and regulated the implementation of the Standards. Subsequently, the mandatory adoption of the International Financial Reporting Standards by the public interest entities was also provided for in Law 4308/2014, as amended by Law 4410/2016 “Amendments to the National Customs Code and other provisions” (Government Gazette A’ 141 / 3.8.2016).
Recently, EU accounting law was reinforced by Directive 2013/34/EU of 26.6.2013 “On the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of
the Council and repealing Council Directives 78/660/EEC and 83/349/EEC Text with EEA relevance”. While this directive does not introduce significant changes to the existing framework as regards the application of International Financial Reporting Standards by Member State companies, it aims at creating a less demanding environment for small and medium-sized enterprises and groups, which are not under the category of public interest entities.
The rules of Directive 2013/34/EC are incorporated into Greek law by Law 4308/2014, which, as already mentioned, is the framework law of Greek Accounting Standards, which are applied in our country for the preparation of statutory financial statements by entities that do not fall under the public interest category. Following the spirit of the EU law, the Greek legislator declares that financial statements prepared by entities that are not in the public interest are differentiated in structure and content depending on the size of the entity (or group). In this framework, Law 4308/2014 introduces criteria according to which the entities are distinguished in “very small”, “small”, “medium” and “large”. The categorization of corporate groups follows the same pattern.
Legislation for independent auditing of the financial statements in Greece
Following the incorporation of EU Accounting Directives into Greek law, the latter directives regulating the audit profession and the independent auditing of financial statements have also been adopted.
At EU level, a new Regulation and a new Directive issued in 2014 have introduced major changes to previous legal and regulatory framework that governed the independent auditing of stand-alone and consolidated financial statements.
In particular, the new Directive 2014/56/EU of the European Parliament and of the Council of 16 April 2014 “amending Directive 2006/43/EC on statutory audits of annual accounts and consolidated accounts Text with EEA relevance” amended the framework in the EU Member States that governed the audit profession and the independent auditing of the financial statements as implemented by previous Directive 2006/43/EC.
At the same time, “Regulation (EU) No 537/2014 of the European Parliament and of the Council of 16 April 2014 on specific requirements regarding statutory audit of public-interest entities and repealing Commission Decision 2005/909/EC Text with EEA relevance”, includes specific guidance as regards the independent auditing of the financial statements of public interest entities, which was extended to issues of corporate governance. This regulation has significantly reinforced the legal framework regulating the statutory auditing of the financial statements of public interest entities at various levels, abolishing Commission Decision 2005/909/EC.
Similarly in Greece, the legislator introduced in 2017 a new stricter law on statutory auditing of stand - alone and consolidated financial statements, repealing most of the articles of the previous law and fully incorporating the new requirements of European law of the new Audit Directive of the European Parliament and of the Council. In particular, Law 4449/2017 “Statutory audit of annual and consolidated financial statements and public supervision of he audit work and other provisions” (Government Gazette A’ 7 / 24.1.2017) repealed Articles 1 to 43 and Article 45 of Law 3693/2008 “Harmonisation of Greek legislation with Directive 2006/43/EC on statutory audits of annual accounts and consolidated accounts, amending Council Directives 78/660/EEC and 83/349/EEC and repealing Council Directive 84/253/
EEC, and other provisions” (Government Gazette A 174 / 25.8.2008). At the same time, as of 2017, the directives of Regulation (EU) No. 537/2014 on the audit of the financial statements of public interest entities are fully implemented in the country.
Audit profession in Greece is supervised by the Hellenic Accounting and Auditing Standards Oversight Board (HAASOB), which is also responsible for the introduction and adoption of accounting standards in the country. HAASOB was established in Greece by Law 3148/2003 “Hellenic Accounting and Auditing Standards Oversight Board, replacement and supplementation of the provisions on electronic money institutions, and other provisions” (Government Gazette A’ 136 / 5.6.2003), as amended by Law 4170/2013.
Furthermore, the work of certified public accountants in Greece (who are appointed according to law as “Certified Public Accountants” (O.E.L.) and are members of the Institute of Certified Public Accountants of Greece (S.O.E.L) set up by Article 1 of Presidential Decree
226/1992 “On the Constitution and Organizing of the Institute of Certified Public Accountants, as well as on the conditions for registration in the Special Public Register and the public practice of the profession of Certified Public Accountant (Government Gazette A’ 120) fully complies with International Standards on Auditing (ISAs) of the International Federation of Accountants (IFAC), which have been incorporated into Greek law, taking into account their recent amendments to the Auditor’s Report on the Financial Statements of public interest entities and are applicable without any derogation (Government Gazette B’ 2848 / 23.10.2012 and Government Gazette B’ 526 / 16.02.2018). Finally, statutory auditors in Greece provide their services in accordance with the principles and requirements of the Code of Ethics for Professional Accountants of the International Federation of Accountants, which has been incorporated into Greek law and is implemented by Decision 2210/2017 (Government Gazette B’ 3916 / 7.11.2017).
Key points of Greek law for the auditing of financial statements
It is clear that the statutory audit of the financial statements, whether these are produced by public interest entities or others, as well as the operation of the audit profession in Greece, is in all respects shielded by a strong legal and regulatory framework which fully complies with the equivalent rules and regulations of the European Union.
The statutory audit of financial statements in Greece allows no exemptions for public interest entities. Thus, financial statements prepared by public interest entities are independently audited by statutory auditors and are accompanied by the relevant audit reports. However, for non-public entities, the requirement to audit their statutory financial statements is determined by certain criteria. Thus, according to Law 4336/2015 “Provisions regarding pensions - Ratification of the Draft Agreement on the Financial Assistance by the European Stability Mechanism (E.S.M) regarding the implementation of the Financing Agreement” (Government Gazette A’ 94 / 14.8.2015), the entities that are subject to mandatory audit of their financial statements are public interest entities and entities that according to Law 4308/2014 fall under the category “medium” and “large”. For groups that do not belong to public interest entities, the audit of their consolidated financial statements is mandatory only when they are in the “large” category.
The entities classified under Law 4308/2014 as “large” are those that exceed the limits of 2 of the 3 criteria set out in Article 2 of the Law, i.e. total assets of €20 million, net turnover of €40 million and average staff of 250 people.
Entities classified as “medium” are those that do not exceed the limits of 2 of the 3 criteria defined in Article 2 of the same law as “large” but do not fall under the “small” or “very small” categories. These entities have total assets of more than €4 million, a net turnover of more than €8 million and an average of over 50 employees. These entities are exempted from the obligation to prepare a cash flow statement and must prepare the remaining four individual statements (balance sheet, statement of income, net equity and notes).
Consolidated financial statements are only required by groups that consist of a parent company and subsidiaries that are included in the consolidation. These groupings on a consolidated basis -in accordance with the provisions of paragraph 1 of article 31 of Law 4308/2014 at the balance sheet date of the parent entity- are classified as “large” when they exceed the limit of 2 out of the 3 criteria set out in this article, i.e. a total of €20 million of assets, a net turnover of €40 million and an average of 250 employees.
Considering the overall audit framework of statutory financial statements, which, as mentioned above, fully complies with the requirements of Directive 2104/56/EU of the European Parliament and the Council of the European Union, it is worth highlighting some points of particular significance for the quality and comprehensiveness of the framework and could be described as points of reference.
As far as the regulation of the audit profession is concerned, it is worth noting that:
- Only certified public accountants, in this case the certified auditors - accountants who are members of the Institute of Certified Public Accountants, have the right to audit financial statements; this right is granted by the Hellenic Accounting and Auditing Standards Oversight Board provided that specific strict conditions are explicitly defined in Law 4449/2017. Additional authorization to carry out statutory audits is granted by HAASOB to companies (auditing firms). Natural and legal persons receiving such authorization shall be entered in a special public register. This register is kept online and it is accessible to the public.
- The conditions for the authorization of statutory auditing of financial statements relate in principle to the confirmed integrity and honesty of the person who should not have been convicted of theft, embezzlement, bribery, breach of duty and any crime against sexual freedom or a crime of economic exploitation of sexual life or a felony. Furthermore, the possession of a higher education qualification and the successful completion of the written professional examinations in a significant number of courses, covering19 knowledge topics in accounting, auditing, civil, commercial, corporate and bankruptcy law, tax law, insurance and labor law, computer science, business economics, financial management and finally mathematics and statistics.
- The acquisition of a professional license by individuals also requires the completion of a 5-year internship in an audit firm, 2 years of which must take place after completion of the professional examinations.
- The continuation of the statutory audit permission requires the participation and completion of continuing education programmes, which are approved and supervised by the Hellenic Accounting and Auditing Standards Oversight Board.
- For the provision of a professional license for the implementation of statutory audits of financial statements to audit firms, inter alia, it is a prerequisite the majority (at least two thirds) of the management or management body to comprise of individual persons -who fulfill the criteria for obtaining a professional license- or other audit firms that have been granted this license in any of the EU Member States.
In addition, as regards the exercise of the audit profession, the execution and supervision of audit projects and reports, the following should be taken into account:
- Certified public accountants are required to faithfully apply the guidelines of the International Federation of Accountants’ Code of Ethics for Professional Accountants, which, as mentioned above, has been incorporated into national law.
- The legal framework includes extensive rules and regulations as regards the implementation of professional design and audit planning, focusing on assessing the risk of a material misstatement that may be discovered due to fraud or (unintentional) error.
- It is explicitly stated in the relevant law that any audit of the financial statements is carried out with independence and objectivity. This requirement is reinforced by a detailed record of the standards of independence and objectivity and the safeguarding measures to be taken at the level of the audit firm and company executives. In addition, the law also records specific documentation requirements for the actions taken to ensure independence and objectivity and to eliminate any threats.
- Of particular stringency are the requirements of the law as regards the safeguarding of confidentiality and professional secrecy in the execution of audit projects.
- Auditing firms are required to retain an internal organization of specific and rigorous specifications. The requirements of the law at this point are extensive and fully endorse the basic principles of the International Federation of Accountants’ International Standard on Quality Control 1.
- Audit assignments are performed in accordance with the International Accounting Standards of the International Federation of Accountants, taking into account the specific provisions of Directive 2014/56/EU of the European Parliament and of the Council Regulation (Law 4449/2017) and (EU) 537/2014 of the European Parliament and of the Council. As already pointed out, the International Auditing Federation’s International Auditing Standards also constitute national law.
- Audits of consolidated financial statements of groups are carried out under a specific framework that is fully adopted to the principles of the International Auditing Standard 600. The main focus of this framework is that the overall audit responsibility lies entirely with the assigning partner of the group.
- As regards the auditor’s report, the provisions of the law on the structure and contents of the report fully comply with the International Auditing Standard 700 and the other professional standards of the International Federation of Accountants. However, when the audit reports refer to financial statements of public interest entities, the directives in Regulation (EU) 537/2014 of the European Parliament and the Council, which are in line with the International Federation of Accountants International Standard 701 guidelines are also taken into account.
- Audits, auditors and audit firms are subject to regular quality controls by the Hellenic Accounting and Auditing Standards Oversight Board.
- Finally, in the case of violations, the law provides for the imposition of administrative and disciplinary sanctions.
Law 4449/2017 includes an explicit chapter (Articles 44 to 48) with specific provisions for the audits of financial statements of public interest entities. This chapter, which fully complies with the requirements of European Parliament and Council Directive 2104/56/EU, has incorporated specific provisions of Regulation (EU) 537/2014 of the European Parliament and of the Council, which is fully applicable to Greece.
It is worth noting Article 44 (Article 39 of Directive 2104/56 / EU), which contains extensive requirements for public interest audit committees. These specific requirements are supplementary to Law 3016/2002 and extend to the full scope of the establishment and operation of these committees. In particular, the provisions of Article 44 specify the obligation of setting up a three-member audit committee as an independent committee or an independent body in the board of directors. Furthermore, specific requirements for the qualifications of the members of the committees, their roles and the functions are included, especially regarding the statutory audit of the financial statements, the selection and monitoring of the independence of the statutory auditors. It also appoints supervisory bodies (Capital Commission, Bank of Greece and the Hellenic Accounting and Auditing Standards Oversight Board), which exercise independent oversight of the functioning of the audit committees.
As already mentioned, the legal and regulatory framework for the audits of financial statements of public interest entities in Greece is further strengthened by the application of the provisions of Regulation (EU) 537/2014 of the European Parliament and of the Council.
In summation, the following points deserve particular attention:
Special arrangements for audit fees, which safeguard the independence of the auditor.
Reference to specific non-audit work that is forbidden to be carried out by statutory auditors when they are appointed as independent auditors of the financial statements.
Additional arrangements with regard to the independence of the statutory auditor who has undertaken the independent audit of financial statements, and in particular the obligation to discuss it with the audit committee.
Mandatory implementation of International Auditing Standards in all phases of the audit work.
Mandatory engagement of a second independent certified public accountant (apparently from the same audit firm; there is special provision for small auditing firms), which is responsible for reviewing the quality of the audit work. The second auditor is defined as a “quality auditor”.
Definition of the structure and contents of the audit report, which, as mentioned above, are consistent with the International Auditing Federation’s International Auditing Standards guidelines.
The filing of an additional report to the audit committee is also required. This report should include a significant amount of information regarding the independence of auditors, the design and execution of audit work, the findings and conclusions, and, finally, key audit matters (important issues that according to the auditor’s professional judgment may stand out during the audit); special reference is made to those key audit matters that will be mentioned in separate paragraphs in the audit report.
Obligation of statutory auditors - accountants for an annual publication of a transparency report and the regular provision of information to the relevant authorities.
It is clear that the legal and regulatory framework, as well as the state supervision in the fields of drafting and auditing of financial statements in Greece, is in line with the requirements of the relevant European Union law.
The audit profession is governed by a legal framework (which comprises of national and EU rules and regulations) incorporating the requirements and directives of the International Auditing Standards and the Code of Ethics for Professionals of the International Federation of Accountants.
The above said, the audits of the financial statements in Greece and their oversight do not deviate from the best international practice, ensuring investors’ confidence in the information provided by company management through the financial statements.
