Requirements for conducting audits of financial statements in Austria are contained in the Austrian Commercial Code, supplemented by recommendations issued by the Chamber of Chartered Accountants (KWT). According to the 2007 KWT self-assessment, although application of International Standards on Auditing (ISAs) is accepted, national legal requirements take precedence. However, in instances where no national guidance exists, ISAs have to be applied. There is insufficient publicly available information on whether the national regulations conform to or differ from the international standards. Austrian auditing practices, however, are likely to change due to the enactment of Directive 2006/43/EC of the European Parliament and the Council, which came into force in May 2006. Per this directive, all statutory audits of annual and consolidated accounts in European Union (EU) countries are required to be conducted on the basis of ISAs as adopted by the European Commission. EU member states shall adopt and publish the provisions necessary to comply with this Directive before June 29, 2008. Member states may impose additional requirements relating to the statuary audits of annual and consolidated accounts for periods expiring on June 29, 2010.

General Overview

As described in the 2007 UHY Hacker "Doing Business in Austria" guide, a statutory audit is required for financial statements of banks, insurance companies, investment funds, public corporation, large and medium size limited liability companies or partnerships, and certain small companies that have a mandatory supervisory board. Austrian auditing practices are largely governed by the Austrian Commercial Code (Handelsgesetzbuch, or HGB), supplemented by expert opinions, guidelines, and comments of the Chamber of Chartered Accountants (Kammer der Wirtschaftstreuhänder, or KWT). However, the recommendations of the KWT are nonbinding and, as explained in the 2007 KWT self-assessment, "[the KWT] does not have a formal authority to develop auditing standards, but it is the official (legal) representative body of the profession and sets "standards of professional conduct" via expert opinions" (p.31). The self-assessment further notes that although application of International Standards on Auditing (ISAs) is accepted, national legal requirements take precedence. As described in the self-assessment, "if there would be any conflicts between ISAs and national auditing standards, national auditing standards have priority.... Conversely, if in the national auditing standards regulations are missing, ISAs have to be applied to fill gaps" (pp. 29-30).

Austrian auditing practices are likely to change with the enactment of Directive 2006/43/EC of the European Parliament and the Council, which came into force in May 2006. Per this directive, all statutory audits of annual and consolidated accounts will be required to be carried out on the basis of ISAs as adopted by the European Commission (EC). European Union member states shall adopt and publish the provisions necessary to comply with this Directive before June 29, 2008. Member states may impose additional requirements relating to the statuary audits of annual and consolidated accounts for periods expiring on June 29, 2010.

According to the description of the regulatory framework provided in the 2005 KWT self-assessment, the Financial Market Authority (Finanzmarktaufsicht, or FMA) is an autonomous integrated authority responsible for the supervision of the financial market. Under the Banking Act (Bankwesengesetz) and the Insurance Supervision Act (Versicherungsaufsichtsgesetz), banks and insurance companies respectively must comply with specific requirements for financial reporting. Further, financial statements of banks must be audited by a bank appointed auditor; however, the FMA has the right to object to the appointment. For the insurance sector, the FMA also has the right to object to the authorization of the auditor. However, the assessment pointed out that the FMA has no specific powers for the enforcement of accounting or auditing requirements. In fact, according to a 2006 presentation by Palmer, there is no enforcement mechanism for financial reporting in Austria. As part of its ongoing efforts to create an adequate system, the FMA chaired a working group on enforcement set up by the Austrian Financial Reporting and Auditing Committee (AFRAC). The AFRAC was established by the Austrian parliament in 2004 and its main functions include the development of national and international accounting, financial reporting, and auditing standards; and advising the relevant Ministries on proposed legislation in the field. In accordance with the EU Transparency Directive, the presentation noted that a concept paper for an Austrian Enforcement Law has been developed and the law was likely to be implemented in 2007. The Palmer paper further detailed the structural aspects of the future enforcement body.

The Austrian Institute of Auditors (Institut Österreichischer Wirtschaftsprüfer, or IWP) and the KWT are the two main professional bodies in Austria. These are private standard setting bodies and participation is voluntary. One of the functions of these two bodies as described in the 2000 Fédération des Experts Comptables Européens report is the interpretation of legal regulations. With regard to compliance with the Code of Ethics, the 2006 IWP self-assessment noted that "in Austria the regulations about professional conduct (ethical behavior) of auditors are part of the legal regulations for the profession" (p. 35). These requirements are laid out in the various laws, such the Auditing Law and the Accountants Law, and neither the KWT nor the IWP set any additional requirements. The IWP and the KWT are listed as members on the International Federation of Accountants website.

The Principles

ISA 200 Objective and General Principles Governing an Audit of Financial Statements (effective 2006)

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ISA 210 Terms of Audit Engagements (effective 2006)

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ISA 220R Quality Control for Audits of Historical Financial Information (effective 2005)

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ISA 230R Documentation (effective 2006)

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ISA 240 The Auditor’s Responsibility to Consider Fraud in an Audit of Financial Statements (effective 2004)

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ISA 250 Consideration of Laws and Regulations in an Audit of Financial Statements (effective 2004)

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ISA 260 Communications of Audit Matters With Those Charged With Governance (effective 2004)

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ISA 300 Planning an Audit of Financial Statements (effective 2004)

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ISA 315 Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement (effective 2004)

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ISA 320 Audit Materiality (effective 2004)

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ISA 330 The Auditor’s Procedures in Response to Assessed Risks (effective 2006)

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ISA 402 Audit Considerations Relating to Entities Using Service Organizations (effective 2004)

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ISA 500 Audit Evidence (effective 2004)

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ISA 501 Audit Evidence - Additional Considerations for Specific Items (effective 2004)

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ISA 505 External Confirmations (effective 2004)

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ISA 510 Initial Engagements — Opening Balances (effective 2004)

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ISA 520 Analytical Procedures (effective 2004)

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ISA 530 Audit Sampling and Other Selective Testing Procedures (effective 2004)

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ISA 540 Audit of Accounting Estimates (effective 2004)

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ISA 545 Auditing Fair Value Measurements and Disclosures (effective 2004)

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ISA 550 Related Parties (effective 2004)

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ISA 560 Subsequent Events (effective 2006)

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ISA 570 Going Concern (effective 2004)

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ISA 580 Management Representations (effective 2004)

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ISA 600 Using the Work of Another Auditor (effective)

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ISA 610 Considering the Work of Internal Auditing (effective 2004)

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ISA 620 Using the Work of an Expert (effective 2005)

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ISA 700 The Auditor’s Report on Financial Statements (effective 2006)

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ISA 701 Modifications to the Independent Auditor's Report (effective 2006)

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ISA 710 Comparatives (effective 2004)

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ISA 720 Other Information in Documents Containing Audited Financial Statements (effective 2004)

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ISA 800 The Auditor’s Report on Special Purpose Audit Engagements (effective 2006)

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