Law 22/2015 of 20 July on the Audit of Accounts

OFFICIAL STATE BULLETIN No. 173 Tuesday, July 21, 2015 Sec. I. Page 60273 I. GENERAL PROVISIONS HEAD OF STATE 8147 Law 22/2015, of July 20, on the Audit of Accounts. FELIPE VI KING OF SPAIN To all who see and understand this. Know: That the General Courts have approved and I come to sanction the following law.

INDEX Preliminary Title. Scope of application, object, legal regime and definitions. Article 1. Scope of application and object. Article 2. Regulatory framework for the activity of audit of accounts. Article 3. Definitions. Title I. On the audit of accounts. Chapter I. On the modalities of audit of accounts. Article 4. Audit of annual accounts and other financial statements or accounting documents. Article 5. Report on the audit of annual accounts. Article 6. Duty to request and supply information. Article 7. Audit of consolidated accounts. Chapter II. Requirements for the exercise of the audit of accounts. Article 8. Official Register of Accountants Auditors. Article 9. Authorization and registration in the Official Register of Accountants Auditors. Article 10. Accountants Auditors authorized in other Member States of the European Union and in third countries. Article 11. Audit firms. Article 12. Deregistration from the Official Register of Accountants Auditors. Chapter III. Exercise of the activity of audit of accounts. Section 1. Professional skepticism and judgment. Article 13. Professional skepticism and judgment. Section 2. Independence. Article 14. General principle of independence. Article 15. Identification of threats and adoption of safeguards. Article 16. Causes of incompatibility. Article 17. Subjective extensions to entities linked or with a control relationship with the audited entity. Article 18. Incompatibilities derived from situations affecting family members of the main responsible auditors. Article 19. Incompatibilities derived from situations affecting persons or entities directly related to the accountant auditor or audit firm. cve: BOE-A-2015-8147 Verifiable at http://www.boe.es

OFFICIAL STATE BULLETIN No. 173 Tuesday, July 21, 2015 Sec. I. Page 60274 Article 20. Incompatibilities derived from situations affecting other persons or entities belonging to the network of the auditor or the audit firm. Article 21. Period of validity of incompatibilities. Article 22. Contracting regime. Article 23. Prohibitions after the completion of audit work. Article 24. Fees and transparency in the remuneration of accountants auditors and audit firms. Article 25. Causes for abstention due to fees received. Section 3. Liability and financial guarantee. Article 26. Civil liability. Article 27. Financial guarantee. Section 4. Internal organization and work of accountants auditors and audit firms. Article 28. Internal organization. Article 29. Organization of work. Section 5. Duty of custody and secrecy. Article 30. Duty of preservation and custody. Article 31. Duty of secrecy. Article 32. Access to documentation. Chapter IV. On the audit of accounts in entities of public interest. Section 1. Common provisions. Article 33. Scope of application. Article 34. Legal regime. Section 2. On the reports. Article 35. Report on the audit of annual accounts. Article 36. Additional report for the Audit Committee in entities of public interest. Article 37. Annual transparency report. Article 38. Report to the national supervisory authorities of entities of public interest. Section 3. Independence. Article 39. Incompatibilities and prohibited services. Article 40. Contracting, rotation and appointment of accountants auditors or audit firms. Article 41. Fees and transparency. Section 4. Internal organization and work in relation to audits of entities of public interest. Article 42. Internal organization. Article 43. Organization of work. Article 44. Transfer file. Article 45. Organizational structure. Title II. Public supervision. Chapter I. Supervisory function. Article 46. Scope of public supervision. Article 47. Resources. Article 48. Subjects on which the supervisory function is exercised. cve: BOE-A-2015-8147 Verifiable at http://www.boe.es

OFFICIAL STATE BULLETIN No. 173 Tuesday, July 21, 2015 Sec. I. Page 60275 Article 49. Supervisory powers. Article 50. Place of verification, investigation and inspection actions. Article 51. Administrative collaboration. Article 52. Control of the activity of audit of accounts: investigations and inspections. Article 53. Investigations. Article 54. Inspections. Article 55. Assistance of professional services and experts. Chapter II. Institute of Accounting and Audit. Article 56. The Institute of Accounting and Audit. Article 57. The President. Article 58. The Audit Committee. Article 59. The Accounting Council. Article 60. Confidentiality and duty of secrecy. Article 61. Transparency and publicity. Chapter III. Supervisory regime applicable to auditors, as well as firms and other audit entities authorized in Member States of the European Union and in third countries. Article 62. Auditors, firms and other audit entities authorized in Member States of the European Union and in third countries. Chapter IV. International cooperation. Article 63. Duty of collaboration with Member States of the European Union and with European supervisory authorities. Article 64. Commission of European Audit Supervisory Bodies. Article 65. Transmission of information to the European Central Bank, the European System of Central Banks and the European Systemic Risk Board. Article 66. Colleges of competent authorities in matters of audit of accounts. Article 67. Coordination with competent authorities of third countries. Title III. Regime of offenses and sanctions. Article 68. Administrative sanctioning power. Article 69. Specialties in procedural matters. Article 70. Administrative liability. Article 71. Offenses. Article 72. Very serious offenses. Article 73. Serious offenses. Article 74. Minor offenses. Article 75. Sanctions for offenses committed by individual accountants auditors. Article 76. Sanctions for offenses committed by audit firms. Article 77. Sanctions for offenses committed by accountants auditors and audit firms in relation to entities of public interest. Article 78. Other additional sanctions. Article 79. Sanctions for offenses committed by non-auditor subjects. Article 80. Determination of the sanction. Article 81. Enforceability of resolutions. Article 82. Publicity of sanctions. Article 83. Administrative liability of dissolved audit firms. Article 84. Obligation to preserve documentation. Article 85. Statute of limitations for offenses. Article 86. Statute of limitations for sanctions. cve: BOE-A-2015-8147 Verifiable at http://www.boe.es

OFFICIAL STATE BULLETIN No. 173 Tuesday, July 21, 2015 Sec. I. Page 60276 Title IV. Fees of the Institute of Accounting and Audit. Article 87. Fee of the Institute of Accounting and Audit for the control and supervision of the activity of audit of accounts. Article 88. Fee of the Institute of Accounting and Audit for the issuance of certificates or documents at the request of a party and for registrations and annotations in the Official Register of Accountants Auditors. Title V. Protection of personal data. Article 89. Protection of personal data. First Additional Provision. Mandatory audit. Second Additional Provision. Audits in entities of the public sector. Third Additional Provision. Audit Committee of entities of public interest. Fourth Additional Provision. Collaboration of the National Markets and Competition Commission in the execution of competences related to the audit of accounts market. Fifth Additional Provision. Report on the evolution of the market. Sixth Additional Provision. Audit firms. Seventh Additional Provision. Coordination mechanisms with public bodies or institutions with control or inspection competences. Eighth Additional Provision. Electronic communications. Ninth Additional Provision. Collaboration with the General Directorate of Registries and Notaries. Tenth Additional Provision. Information on payments made to Public Administrations. First Transitional Provision. Graduates, engineers, commercial professors, architects or university diploma holders. Second Transitional Provision. Situations of incompatibility. Third Transitional Provision. Economic year of application of the provisions contained in the tenth additional provision. Single Repealing Provision. First Final Provision. Modification of the Commercial Code approved by Royal Decree of August 22, 1885. Second Final Provision. Modification of Law 24/1988, of July 28, on the Securities Market. Third Final Provision. Modification of Law 29/1998, of July 13, regulating the Contentious-Administrative Jurisdiction. Fourth Final Provision. Modification of the Consolidated Text of the Capital Companies Law approved by Royal Legislative Decree 1/2010, of July 2. Fifth Final Provision. Modification of Law 27/2014, of November 27, on Corporate Tax. Sixth Final Provision. Competential title. Seventh Final Provision. Incorporation of European Union Law. Eighth Final Provision. Regulatory authorization. Ninth Final Provision. Authorization for the modification of the Statutes of the Institute of Accounting and Audit. Tenth Final Provision. Authorization of the Institute of Accounting and Audit. Eleventh Final Provision. Functions entrusted to the members of the Institute of Certified Account Auditors of Spain, prior to the entry into force of Law 19/1988, of July 12, on the Audit of Accounts. Twelfth Final Provision. No increase in expenditure. Thirteenth Final Provision. Legal regime of the reserve for goodwill in exercises starting from January 1, 2016. Fourteenth Final Provision. Entry into force. cve: BOE-A-2015-8147 Verifiable at http://www.boe.es

OFFICIAL STATE BULLETIN No. 173 Tuesday, July 21, 2015 Sec. I. Page 60277 PREAMBLE I The main object of this Law is to adapt Spanish internal legislation to the changes incorporated by Directive 2014/56/EU of the European Parliament and of the Council, of April 16, 2014, amending Directive 2006/43/EC of the European Parliament and of the Council, of May 17, 2006, on the statutory audit of annual accounts and consolidated accounts, to the extent that it does not comply with it. Along with said Directive, Regulation (EU) No 537/2014 of the European Parliament and of the Council, of April 16, 2014, on specific requirements regarding statutory audit of entities of public interest and repealing Commission Decision 2005/909/EC, has been approved.

The aforementioned Directive repealed the then Eighth Directive 84/253/EEC of the Council, of April 10, 1984, based on point (g) of paragraph 3 of Article 54 of the EEC Treaty, relating to the authorization of persons responsible for the statutory control of accounting documents, incorporated into our legal system through Law 19/1988, of July 12, on the Audit of Accounts, thus regulating for the first time in Spain the activity of audit of accounts. This activity, due to its contribution to the transparency and reliability of the economic and financial information of companies and audited entities, constitutes an element consubstantial to the market economy system collected in Article 38 of the Constitution. Thus, it is configured as that which, through the use of certain review techniques, has as its object the issuance of a report on the reliability of the audited economic and financial information, without being limited to the mere verification that the balances appearing in its accounting entries agree with those offered in the accounts being audited, since the review and verification techniques applied allow, with a high degree of certainty, to give a technical and independent opinion on the accounting as a whole and, in addition, on other circumstances affecting the life of the company, which were not included in said process.

The activity of audit of accounts is characterized by the public relevance it plays by providing a service to the reviewed entity and affecting and interested not only this one, but also third parties who maintain or may maintain relationships with it, given that all of them, the audited entity and third parties, can know the quality of the audited economic and financial information on which the audit opinion issued revolves. With the aim of regulating and establishing sufficient guarantees so that the annual accounts or any other economic and financial information that has been verified by an independent third party is accepted with full confidence by interested third parties, in Law 19/1988, of July 12, on the Audit of Accounts, the activity of audit was defined and provisions were established, among others, the conditions that must be met to access the Official Register of Accountants Auditors and thus exercise such activity, the rules regulating its exercise, the minimum content of the report on the audit of annual accounts, the regime of incompatibilities and liability of accountants auditors, the regime of offenses and sanctions and the attribution to the Institute of Accounting and Audit of the control of the activity and of the disciplinary power of accountants auditors.

Over time, various norms succeeded to complete this regime. Thus, first, Law 4/1990, of June 29, of General State Budgets for 1990, incorporated a specific way of registration in the Official Register of Accountants Auditors for persons who, not having a university degree, had, however, obtained a sufficient degree to access the university and acquired 8 years of practical training, greater than that required in general. At the same time, certain particular rules were established for the purposes of accrediting the practical training acquired prior to the entry into force of Law 19/1988, of July 12, on the Audit of Accounts, a requirement necessary to obtain the authorization of the Institute of Accounting and Audit for the purposes of registration in the Official Register of Accountants Auditors. cve: BOE-A-2015-8147 Verifiable at http://www.boe.es

OFFICIAL STATE BULLETIN No. 173 Tuesday, July 21, 2015 Sec. I. Page 60278 Subsequently, Law 31/1991, of December 30, of General State Budgets for the year 1992, modified the composition of the Advisory Committee of the Institute of Accounting and Audit and Law 13/1992, of June 1, on Own Resources and Supervision on a Consolidated Basis of Financial Entities, modified the regime of offenses and sanctions. Likewise, the obligation for accountants auditors of entities subject to the supervision regime provided for in said Law 13/1992, of June 1, to immediately issue the report on the audit of annual accounts corresponding when they knew and verified the existence of alleged irregularities or situations that could seriously affect the stability, solvency or continuity of the audited entity, was established.

With Law 3/1994, of April 14, adapting Spanish legislation in matters of credit entities to the Second Banking Coordination Directive and introducing other modifications related to the financial system, the obligation to subject to audit the accounting information that foreign credit entities must publish annually for the branches they have in Spain, when they do not have to present annual accounts of their activity in Spain, was incorporated.

Law 2/1995, of March 23, of Limited Liability Companies, included the possibility of annually extending the audit contract once the initial contracted period has ended.

Subsequently, Law 37/1998, of November 16, reforming Law 24/1988, of July 28, on the Securities Market, gave a new wording to the obligation for accountants auditors of entities subject to the supervision regime of the Bank of Spain, the National Securities Market Commission and the General Directorate of Insurance, to quickly communicate to said supervisory Institutions any fact or decision regarding the audited entity of which they had knowledge in the exercise of their functions and that could significantly affect the exercise of their activity, its continuity, stability or solvency, or in cases where the opinion in their report was denied or unfavorable or where the issuance of the audit report was prevented.

In addition, through Law 41/1999, of November 12, on payment systems and settlement of securities, a period of one year was fixed as a specific period to resolve and notify the resolution in sanctioning procedures derived from the commission of the offenses provided for in Law 19/1988, of July 12, on the Audit of Accounts.

Along with these important modifications, two substantial reforms must be highlighted. The first of them was carried out through Law 44/2002, of November 22, of Measures for the Reform of the Financial System, in its articles 48 to 53, which introduced substantial modifications affecting various aspects: the unified examination of the access system to the Official Register of Accountants Auditors, the obligation to follow continuous training courses for accountants auditors, the incorporation of specific access routes to the Official Register of Accountants Auditors for officials belonging to certain bodies of the administration whose training and functions were related to the audit of accounts of the public sector, the duty of independence and the causes of incompatibilities, the duty of rotation of the auditor in relation to certain audited entities, the civil liability of accountants auditors, the duty of custody of the documentation of audit work and access to said documentation, the regime of offenses and sanctions, the competences of the Institute of Accounting and Audit in relation to the control of the activity of audit of accounts and the creation of the fee of the Institute of Accounting and Audit for the issuance of audit reports.

Subsequently, Law 62/2003, of December 30, of fiscal, administrative and social order measures, modified the composition and functions of the governing bodies of the Institute of Accounting and Audit.

Law 16/2007, of July 4, of reform and adaptation of commercial legislation in accounting matters for its international harmonization based on European Union regulations, in its fifth additional provision, modified in turn by the fourth final provision of Law 34/2007, of November 15, on air quality and atmospheric protection, modified Law 19/1988, of July 12, on the Audit of Accounts, in relation to the contracting periods of accountants auditors, to enable the renewal of the audit contract for successive periods of up to three years once the initial contracting period has ended.

The second of the substantial reforms of the Law took place with the entry into force of Law 12/2010, of June 30, modifying Law 19/1988, of July 12, on the Audit of Accounts, Law 24/1988, of July 28, on the Securities Market and the Consolidated Text of the Law of Joint Stock Companies, approved by Royal Legislative Decree 1564/1989, of December 22, for its adaptation to Community regulations.

With this Law, Directive 2006/43/EC of the European Parliament and of the Council, of May 17, 2006, on the statutory audit of annual accounts and consolidated accounts, amending Council Directives 78/660/EEC and 83/349/EEC and repealing Council Directive 84/253/EEC, was transposed into our internal legal system. The time elapsed since the entry into force of said Directive 84/253/EEC, the changes that occurred in the economic and financial environment with higher quotas of globalization and internationalization, and the lack of a harmonized approach to audit in the European Union, mainly in matters of public supervision, made it imperative to undertake a reform process in this area, which culminated with said Directive 2006/43/EC.

This Directive constituted an important step towards achieving greater harmonization of the requirements required for the exercise of the audit activity in the European Union, as well as of the principles that must govern the public supervision system in this area, representing at the time of its adoption a turning point in the regulation of the audit activity. The new regulation was configured on the basis of understanding that the audit activity plays a function of public interest, understood as the existence of a broad set of people and institutions that trust the action of the accountant auditor, since its correct and adequate execution constitute factors that contribute to the proper functioning of the markets by increasing the integrity and efficiency of financial statements as vehicles for transmitting information. In contrast to the repealed Directive which contained basic rules of authorization, independence and publicity of accountants auditors, Directive 2006/43/EC expanded its scope while at the same time seeking to harmonize a greater number of aspects related to: the authorization and registration of auditors and audit firms, including those from other Member States of the European Union and third countries, professional ethics rules, independence and objectivity, the conduct of audits in accordance with international auditing standards adopted by the European Union, the full responsibility of the auditor who carries out the audit of consolidated financial statements, the quality control of auditors and audit firms, effective systems of investigation and sanction, specific provisions relating to entities of public interest and cooperation and mutual recognition between the cve: BOE-A-2015-8147 Verifiable at http://www.boe.es