Glossary for Register of Third Country Audit Entities

Affiliate
An ‘affiliate’ means any undertaking, regardless of its legal form, which is connected to the third country audit entity by means of common ownership, control or management, and which provides services to ‘relevant audit clients’.

Audit Directive
The EU Statutory Audit Directive 2006/43/EC

EU/EEA
Members of the EU: Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, United Kingdom.

Members of the EEA that are not also members of the EU: Iceland, Liechtenstein and Norway.

Network
According to Article 2 (7) of Directive 2006/43/EC a ‘network’ is:
(a) the larger structure which is aimed at cooperation and to which the applicant belongs, and
(b) which is clearly aimed at profit- or cost-sharing or shares common ownership, control or management, or shares common quality-control policies and procedures, or shares a common business strategy, or shares the use of a common branch-name or shares a significant part of professional resources.

Registered
Where the third country audit firm is from a country not listed in the Annex to the Commission's Decision, it must apply for registration according to Article 45 of the Directive. Its status is then shown in the register as "Registered". The information that such firms have to submit on their application for registration is on Form B which should be read with the accompanying guidance. This information is subject only to limited checks at the application stage. Firms with this status are unlikely to be subject to substantive or independent regulation in their home country. Such firms are in principle subject to periodic external inspections by or on behalf of the Oversight Board. We expect to consider with other auditor oversight bodies in Europe how that requirement can best be met, with a view to consulting formally on this during 2010.

Relevant audit client
A relevant audit client is a company incorporated outside the EU/EEA whose transferable securities are admitted to trading on a regulated market of any Member State of the EU/EEA within the meaning of point 14 of Article 4(1) of Directive 2004/39/EC. This refers to an issuer as defined in Article 2 (1) (d) of Directive 2004/109/EC, except when:

1.  the company is an issuer exclusively of debt securities admitted to trading on a regulated market in the relevant Member State of the EU/EEA within the meaning of Article 2(1)(b) of Directive 2004/109/EC, the denomination per unit of which is at least EUR 50 000 or, in case of debt securities denominated in another currency, equivalent, at the date of issue, to at least EUR 50 000; or
    
2. the company is an issuer exclusively of units issued by collective investment undertakings other than closed-end type, or units acquired or deposited of in such collective investment undertakings within the meaning of Article 1 (2) of Directive 2004/109/EC.

The applicant should only include audit clients for which he is appointed as statutory auditor of the annual accounts in respect of financial years starting after 29 June 2008.

Third country audit entity
According to the Article 2.4 of the Audit Directive a third country audit entity is "an entity, regardless of its legal form, which carries out audits of the annual or consolidated accounts of a company incorporated in a third country".

Transitional
An audit firm is shown as "Transitional" where it has been accepted for registration in accordance with the requirements of the European Commission Decision of 29 July 2008 (2008/627/EC). Only audit entities from one of the countries listed in the Annex can apply for registration under the Commission's Decision. The countries on the list either already have some form of audit regulation in place or are considering changes that would put a system of audit regulation in place. However, it is important to be aware that there are wide differences in the nature and extent of audit regulation in the countries listed in the Annex. "Transitional" status provides no assurance as to the extent to which that firm is subject to audit regulation in its home country. Nor, where the audit firm is regulated in its home country, is it necessarily the case that the specific audit(s) of the relevant issuer(s) fall within the scope of the home country regulatory regime and, for example, are liable to review in the home country. Audit entities registered by the Oversight Board in accordance with the transitional arrangements will not normally be subject to inspection by the Oversight Board.