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Prohibited non-audit services and cooling-off period

Independence rules for auditors

The Belgian statutory auditor and his network worldwide are not permitted to provide a certain number of non-audit services to the Belgian audited entity, its parent(s) established in the European Economic Area (“EEA”) and its subsidiaries worldwide (the so-called prohibited non-audit services). These prohibited non-audit services cannot be provided from the first day of the first financial year to be audited until the issuing of the audit report (which is generally deemed to coincide with the general assembly approving the financial statements on which the audit report is issued).

Prohibited non-audit services

The prohibited non-audit services are contained in two black lists: a common black list applicable to all audited entities (whether or not public interest entities or PIEs), and a PIE black list only applicable to public interest entities (PIEs).

The common black list defines the prohibited non-audit services, applicable to all audited entities (PIEs and non-PIEs).

Important to bear in mind is that non-EEA subsidiaries of a Belgian audited entity (whether or not a PIE) are only subject to the first 3 prohibited non-audit services on this common list.

These prohibited non-audit services include:

  • Services that involve playing any part in the management or decision-making of the audited entity
  • Bookkeeping and preparing accounting records and financial statements
  • Designing and implementing internal control or risk management procedures related to the preparation and/or control of financial information or designing and implementing financial information technology systems
  • Valuation services, including valuations performed in connection with actuarial services or litigation support services. Services related to the audited entity’s internal audit function

Services with respect to:

  • negotiating on behalf of the audited entity
  • acting in a advocacy role in the resolution of litigation
  • the representation of the audited entity in the settlement of tax or other litigation

Human resources services, with respect to:

  • management in a position to exert significant influence over the preparation of the accounting records or financial statements which are the subject of the statutory audit, where such services involve:

    • searching for or seeking out candidates for such position or
    • undertaking reference checks of candidates for such positions
  • structuring the organisation design
  • cost control

The PIE black list includes a number of prohibited non-audit services for PIEs, relating to the following tax services:

  • preparation of tax forms
  • payroll (“salary”) tax
  • customs duties
  • identification of public subsidies and tax incentives (unless support from the statutory auditor or the audit firm in respect of such services is required by law)
  • support regarding tax inspections by tax authorities
  • calculation of direct and indirect tax and deferred tax
  • provision of tax advice
  • Legal services with respect to the provision of general counsel
  • Payroll services
  • Promoting, dealing in, or underwriting shares in the audited entity
  • Services linked to the financing, capital structure and allocation, and investment strategy of the audited entity (except providing assurance services in relation to the financial statements, such as the issuing of comfort letters in connection with prospectuses issued by the audited entity)

Note that, by way of derogation, valuation services and tax services (other than those relating to payroll tax and customs duties) can be provided to PIEs if the following conditions are simultaneously satisfied:

  • The services have no direct or have immaterial effect, separately or in the aggregate, on the audited financial statements;
  • The estimation of the effect on the audited financial statements is comprehensively documented and explained in the additional report to the audit committee referred to in Article 11 of the Audit Regulation; and
  • The principles of independence laid down in the Audit Directive are complied with by the statutory auditor or the audit firm.

All permissible non-audit services to PIEs, their EEA parents and EEA subsidiaries must be pre-approved by the audit committee.

The Belgian auditor independence legislation contains 2 cooling-in provisions.

First, an auditor may not accept a statutory audit appointment (save in exceptional and duly motivated instances) when, during the 2-year period prior to the appointment, the auditor or his network have:

  • regularly assisted or participated in the bookkeeping or the preparation of the (consolidated) financial statements of the entity to be audited, its Belgian parent or its significant Belgian or foreign subsidiaries, or
  • intervened in the recruitment of individuals who belong to an official body or the management of the entity to be audited, its Belgian parent or its significant Belgian or foreign subsidiaries.

An auditor may also not accept a statutory audit appointment when, during the 1-year period prior to the first day of the first financial year to be audited, the auditor or his network have provided the following non-audit services to the entity to be audited, its EEA parents or its EEA subsidiaries:

  • Design and/or implementation of internal control or risk management procedures related to the preparation and/or control of financial information
  • Design and/or implementation of financial information technology systems

Until two years after the end of the audit mandate, the statutory auditor, the statutory audit firm and the audit partner representing the audit firm is not allowed to accept a mandate as director or any other function in:

  • the audited company
  • a company or person affiliated with the audited company in accordance with art. 1:20 of the Code of Companies and Associations (subsidiaries, parent companies, consortium members and other companies controlled by these entities, i.e. sister companies, as well as natural and legal persons linked with these companies)
  • In addition, the external auditor (“bedrijfsrevisor / reviseur d’entreprises”) who was directly involved as a partner, associate or employee of the statutory auditor in the statutory audit can only become director or take up any other function after at least 1 year has lapsed since the direct involvement in the statutory audit.

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