The authority responsible for setting auditing standards for listed and private companies in Italy is the Commissione Principi di Revisione, a joint committee of the Consiglio Nazionale dei Ragionieri e Periti Commerciali and the Consiglio Nazionale dei Dottori Commercialisti (CNDC). These two organizations merged into the Consiglio Nazionale dei Dottori Commercialisti in effect as of January 1, 2008. According to the CNDC self-assessments submitted to the International Federation of Accountants in 2006, at the time of the assessment, Italy was in the process of adopting International Standards on Auditing (ISAs) with the goal of having them implemented by the end of 2007. Being a member of the European Union, Italy has to transpose the Directive 2006/43/EC which requires all statutory audits to be carried out on the basis of ISAs as adopted by the European Commission. Italy will therefore adopt ISAs in the required timeframe.

General Overview

On May 17, 2006, Directive 2006/43/EC of the European Parliament and the Council came into force requiring all statutory audits to be carried out on the basis of International Standards on Auditing (ISAs) as adopted by the European Commission (EC). The Directive aims at high-level, though not full, harmonization of statutory audit requirements. EU member states are required to adopt and publish the provisions necessary to comply with the Directive by June 29, 2008. The Directive indicates that in an effort to achieve a maximum degree of harmonization, EU member states should be allowed to impose additional national audit procedures or requirements only if these stem from specific national legal requirements relating to the scope of the statutory audit of annual or consolidated accounts. In other words, specific requirements not covered by the adopted ISAs can de added to the national standards. Member States could maintain those additional audit procedures until the audit procedures or requirements have been covered by subsequently adopted international auditing standards. Furthermore, member states including Italy are allowed to omit components of any conflicting ISAs that stem from specific national requirements related to the scope of the statutory audit. The same Directive indicates that member states may impose these additional requirements relating to the statuary audits of annual and consolidated accounts for periods expiring on June 29, 2010.

In its 2006 Financial Sector Assessment Program of Italy, the International Monetary Fund states that Italy has been harmonizing its national auditing standards with ISAs since 2003, after the National Commission for Listed Companies and the Stock Exchange (CONSOB) called for the adoption of the internationals standards on auditing. According to the 2006 self-assessments submitted to the International Federation of Accountants (IFAC) by the Consiglio Nazionale dei Dottori Commercialisti (CNDC), at the time of the assessment, Italy was in the process of adopting ISAs with the goal of having them implemented by the end of 2007. In the same report the CNDC explains that prior to 2008 auditing standards in Italy were enacted by the Commissione Principi di Revisione, a joint committee of the CNDC and the Consiglio Nazionale dei Ragionieri e Periti Commerciali (CNRPC), and promulgated by the CONSOB. However, the Legislative Decree No. 139 enacted in 2005 reformed the regulation of the accounting profession. Effective January 1, 2008, the CNRPC and the CNDC merged to form the Consiglio Nazionale dei Dottori Commercialisti e Degli Esperti Contabili (CNDCEC), as is indicated in the paper titled "The Italian Accountancy Profession" available from the CNDCEC's website. The CNDCEC will have the authority to oversee the auditing and accounting professions in Italy. Per the IFAC's website, the newly created organization is a member of the IFAC.

The CNDCEC's 2005 self-assessment indicates that auditing standards in Italy are issued by the Commissione Principi di Revisione, a joint committee of the CNRPC and the CNDC, which are accountable to the Ministry of Finance and the Ministry of Justice, respectively. Further, under Legislative Decree Consolidated Law on Financial Intermediation No. 58 of 1998 listed entities are required to apply national audit standards. In addition, the self-assessment explains, listed companies are also subject to other rules, including behavior rules of supervising bodies; independence requirements stated in Law Decree No. 99 of 1999; EU Recommendation on Auditor Independence of; and quality assurance requirements as provided in the EU Recommendation 2001/256/EC. The CONSOB has the power to recommend auditing standards for listed companies; oversee the audit process; impose sanctions on auditing firms; and to request required information.

Per the Legislative Decree No. 58 of 1998, there is no requirement for companies that are not listed to use ISAs or the national standards. Per the same self-assessment, the Civil Code of 1942 regulates auditing practices for private companies in Italy. The law was amended by Legislative Decree on Companies No. 6 of 2003, which was enacted on January 1, 2004. Pursuant to the Civil Code, private companies are required to be audited in accordance with national audit standards if one of the following applies: (a) a company is a joint-stock company; (b) a limited liability company is controlled by a listed entity and is material to consolidated financial statements; (c) a limited liability company stock exceeds Euro120,000; and (d) cooperative societies when production exceeds 60 million euro in value, undistributed reserves exceed Euro 4 million, and loans and underwritings by partners exceed Euro 2 million. The CNDCEC's 2005 self-assessment notes that the Bank of Italy (BoI) is the authority that regulates banks and similar financial institutions. The BoI, however, does not have the power to enact auditing standards; however it can issue additional financial reporting regulations that banks have to apply. Other companies like non-financial institutions have no regulatory authority to enforce auditing standards. Insurance companies are supervised by the Institute for the Supervision of Private Insurance Undertakings, which have the power to verify compliance with the imposed rules and regulations, request information and conduct inspections of the regulated entities. In addition, it can summon the auditors of the auditing firms that have the duty of auditing the financial statement of insurance companies.

The Principles

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

ID

According to a 2006 comparison of Italian GAAS and ISAs published by the CNDC, the comparable national standard is Principio di Revisione 200 issued in October 2002. As of September 2006, the CNDC was working to incorporate the conforming amendments arising from the adoption of Audit Risk Standards. The CNDC reports that this new version was expected to be issued by the end of 2006.

ISA 210 Terms of Audit Engagements (effective 2006)

ID

According to a 2006 comparison of Italian GAAS and ISAs published by the CNDC, a comparable national standard has not been issued. However, the agency noted in September 2006 that it was going to adopt a comparable standard by June 2007.

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

ID

According to a 2006 comparison of Italian GAAS and ISAs published by the CNDC, the comparable national standard issued in October 2002 was still in force as of September 2006 and the revised version of ISA 220R had not yet been introduced in the national auditing standards. The CNDC was working to adopt the revised version.

ISA 230R Documentation (effective 2006)

ID

According to a 2006 comparison of Italian GAAS and ISAs published by the CNDC, the comparable national standard is Principio di Revisione 230, issued in October 2002. As of September 2006, the CNDC was working to adopt the revised version of ISA 230R. It was planned that this new version will be issued during the first months of 2007.

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

ID

According to a 2006 comparison of Italian GAAS and ISAs published by the CNDC, a comparable national standard had not been issued, but was going to be adopted by the end of 2006.

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

ID

According to a 2006 comparison of Italian GAAS and ISAs published by the CNDC, the comparable national standard is Principio di Revisione 250, issued in October 2002. The CNDC was working to adopt the conforming amendments arising from the adoption of Audit Risk Standards, and the new version was expected to be issued during the first months of 2007.

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

ID

According to a 2006 comparison of Italian GAAS and ISAs published by the CNDC, the comparable national standard is Principio di Revisione 260, issued in December 2003. The CNDC, as of 2006, was working to adopt the conforming amendments and the new version was expected to be issued during the first months of 2007.

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

ID

According to a 2006 comparison of Italian GAAS and ISAs published by the CNDC, the comparable national standard is Principio di Revisione 300, issued in October 2002. As of 2006, the CNDC was working to adopt the conforming amendments and the new version was due to be issued by the end of 2006.

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

ID

According to a 2006 comparison of Italian GAAS and ISAs published by the CNDC, the comparable national standard is Principio di Revisione, 315 issued in October 2002. The CNDC indicated in 2006 that it was working to adopt ISA 315 and planned to issue the new standard by the end of the same year.

ISA 320 Audit Materiality (effective 2004)

ID

According to a 2006 comparison of Italian GAAS and ISAs published by the CNDC, the comparable national standard is Principio di Revisione 320, issued in October 2002. The CNDC was working to adopt, as of 2006, the conforming amendments arising from Audit Risk Standards. The new version was planned to be issued during the first months of 2007.

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

ID

According to a 2006 comparison of Italian GAAS and ISAs published by the CNDC, ISA 330 had not yet been adopted in national auditing standards. As of 2006, the CNDC was in the process of adopting ISA 330. In October 2002, the CNDC issued Principio di Revisione 400 and Principio di Revisione 401; however, they will be withdrawn once the Principio di Revisione 330 is issued.

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

ID

According to a 2006 comparison of Italian GAAS and ISAs published by the CNDC, the comparable national standard is Principio di Revisione 402, issued in October 2002. At the time the CNDC released this comparison in 2006, it was working to adopt the conforming amendments arising from Audit Risk Standards. These amendments were expected to be released during the first months of 2007.

ISA 500 Audit Evidence (effective 2004)

ID

According to a 2006 comparison of Italian GAAS and ISAs published by the CNDC, the comparable national standard is Principio di Revisione 500, issued in October 2002. At the time the CNDC released this comparison in 2006, it was in the process of adopting the conforming amendments arising from Audit Risk Standards. These amendments were expected to be issued by the end of 2006.

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

ID

According to a 2006 comparison of Italian GAAS and ISAs published by the CNDC, the comparable national standard is Principio di Revisione 501, issued in October 2002. At the time the CNDC released this comparison in 2006, it was in the process of adopting the conforming amendments arising from Audit Risk Standards. These amendments were expected be issued by the end of 2006.

ISA 505 External Confirmations (effective 2004)

ID

According to a 2006 comparison of Italian GAAS and ISAs published by the CNDC, the comparable national standard is Principio di Revisione 505, issued in October 2002. At the time the CNDC released this comparison in 2006, it was in the process of adopting the conforming amendments arising from Audit Risk Standards. These amendments were expected to be issued by then end of 2006.

ISA 510 Initial Engagements — Opening Balances (effective 2004)

ID

According to a 2006 comparison of Italian GAAS and ISAs published by the CNDC, the comparable national standard is Principio di Revisione 510, issued in October 2002. At the time the CNDC released this comparison in 2006, it was working to adopt the conforming amendments arising from Audit Risk Standards. These amendments were expected to be released during the first months of 2007.

ISA 520 Analytical Procedures (effective 2004)

ID

According to a 2006 comparison of Italian GAAS and ISAs published by the CNDC, the comparable national standard is Principio di Revisione 520, issued in October 2002. At the time the CNDC released this comparison in 2006, the agency was in the process of adopting the conforming amendments arising from Audit Risk Standards. These amendments were expected to be issued by the end of 2006.

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

ID

According to a 2006 comparison of Italian GAAS and ISAs published by the CNDC, the comparable national standard is Principio di Revisione 530, issued in October 2002. At the time the CNDC released this comparison in 2006, it was working to adopt the conforming amendments arising from Audit Risk Standards. These amendments were expected to be released during the first months of 2007.

ISA 540 Audit of Accounting Estimates (effective 2004)

ID

According to a 2006 comparison of Italian GAAS and ISAs published by the CNDC, the comparable national standard is Principio di Revisione 540, issued in October 2002. At the time the CNDC released this comparison in 2006, It was working to adopt the conforming amendments arising from Audit Risk Standards. These amendments were expected to be released during the first months of 2007.

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

ID

According to a 2006 comparison of Italian GAAS and ISAs published by the CNDC, a comparable national standard had not been addressed in national auditing standards. As of 2006, the CNDC was in the process of adopting ISA 545, by the first months of 2007.

ISA 550 Related Parties (effective 2004)

ID

According to a 2006 comparison of Italian GAAS and ISAs published by the CNDC, comparable national standard is Principio di Revisione 550, issued in October 2002. At the time the CNDC released this comparison in 2006, it was working to adopt the conforming amendments arising from Audit Risk Standards. These amendments were expected to be released during the first months of 2007.

ISA 560 Subsequent Events (effective 2006)

ID

According to a 2006 comparison of Italian GAAS and ISAs published by the CNDC, the comparable national standard is Principio di Revisione 560, issued in October 2002. At the time the CNDC released this comparison in 2006, it was working to adopt the conforming amendments arising from Audit Risk Standards. These amendments were expected to be released during the first months of 2007.

ISA 570 Going Concern (effective 2004)

ID

According to a 2006 comparison of Italian GAAS and ISAs published by the CNDC, the comparable national standard is Principio di Revisione 570, issued in January 1995. At the time the CNDC released this comparison in 2006, it was working to adopt the conforming amendments arising from Audit Risk Standards. These amendments were expected to be released during the first months of 2007.

ISA 580 Management Representations (effective 2004)

ID

According to a 2006 comparison of Italian GAAS and ISAs published by the CNDC, the comparable national standard is Principio di Revisione 580, issued in October 2002. At the time the CNDC released this comparison in 2006, it was working to adopt the conforming amendments arising from Audit Risk Standards. These amendments were expected to be released during the first months of 2007.

ISA 600 Using the Work of Another Auditor (effective)

ID

According to a 2006 comparison of Italian GAAS and ISAs published by the CNDC, the comparable national standard is Principio di Revisione 600, issued in July 2003. At the time the CNDC released this comparison in 2006, it was working to adopt the conforming amendments arising from Audit Risk Standards. These amendments were expected to be released during the first months of 2007.

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

ID

According to a 2006 comparison of Italian GAAS and ISAs published by the CNDC, the comparable national standard is Principio di Revisione 610, issued in October 2002. At the time the CNDC released this comparison in 2006, it was working to adopt the conforming amendments arising from Audit Risk Standards. These amendments were expected to be released during the first months of 2007.

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

ID

According to a 2006 comparison of Italian GAAS and ISAs published by the CNDC, the comparable national standard is Principio di Revisione 620, issued in October 2002. At the time the CNDC released this comparison in 2006, it was working to adopt the conforming amendments arising from Audit Risk Standards. These amendments were expected to be released during the first months of 2007.

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

NC

According to a 2006 comparison of Italian GAAS and ISAs published by the CNDC, a comparable national standard has nod yet been addressed in national auditing standards.

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

ID

According to a 2006 comparison of Italian GAAS and ISAs published by the CNDC, a comparable national standard had not yet been issued. However, the CNDC indicated in 2006 that it was going to adopt ISA 701 by end of 2007.

ISA 710 Comparatives (effective 2004)

ID

According to a 2006 comparison of Italian GAAS and ISAs published by the CNDC, a comparable national standard had not yet been addressed in national auditing standards. As of 2006, the CNDC was in the process of adopting ISA 710 by the end of 2007.

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

ID

According to a 2006 comparison of Italian GAAS and ISAs published by the CNDC, a comparable national standard had not yet been addressed in national auditing standards. The CNDC was, as of 2006, in the process of adopting ISA 720 by the end of 2007.

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

ID

According to a 2006 comparison of Italian GAAS and ISAs published by the CNDC, a comparable national standard had not yet been addressed in national auditing standards. The CNDC was, as of 2006, in the process of adopting ISA 800 by the end of 2007.