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Stricter internal auditing requirements

Stricter internal auditing requirements

Published mid last year, the Romanian Statutory Audit Law 162/2017 (“the Law”) made significant changes to statutory audits carried out in Romania, as a result of the EU Audit Reform legislation package being transposed into national legislation (i.e. increased focus on transparency for audit reports of public interest entities, an additional report to the audit committee etc.).

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This law also reemphasizes the importance of internal audit, which is mandatory for entities that are subject to statutory audit.

Internal audits bring valuable benefits to a company, such as:

  • Reviewing the extent to which the company has achieved its objectives.
  • Identifying risks within the company and designing plans to maintain them within acceptable limits for the purposes of the business.
  • Contributing to the protection of property and to reducing the possibility of fraud.
  • Improving the efficiency and effectiveness of operations.
  • Increasing the reliability and integrity of financial reporting.
  • Ensuring compliance with laws, regulations, policies and procedures.
  • Establishing monitoring procedures.
  • Testing the internal control environment.
  • Identifying opportunities for improvement.

The law has introduced penalties of between 50.000 and 100.000 lei for failure to carry out an internal audit by companies which are required to do so. It also reiterates the requirement that auditors who coordinate internal audits should be active financial auditors.

Consequently, the law is particularly important for Romanian companies which up to now have organized internal audits at group level (i.e. outside Romania), which have also covered the Romanian entity as well as for companies which have outsourced their internal audits to a service provider outside Romania. These companies must ensure that the internal auditors responsible for organizing and conducting the internal audit are active financial auditors registered in Romania, i.e. active members of the Romanian Chamber of Auditors (CAFR), authorized by the Authority for the Public Oversight of the Activity of the Statutory Audit (ASPAAS).

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