Which companies are subject to review and what is reviewed?
The Accounting Control Act applies to publicly traded companies whose securities (including bonds) are admitted to trading on a regulated market and whose Member State of Origin (according to Article 1 paragraph 12 Stock Exchange Act 2018) is Austria (sections 1 and 2, RL-KG). This means all companies that have issued shares, bonds, warrants or option certificates listed on the Official Market of the Vienna Stock Exchange or any other regulated market of stock exchanges in the EU and whose Member State is Austria. Other forms of securities trading (e.g. multilateral trading systems such as the Third Market) are not covered by these provisions.
The subject of the review is the annual financial statements and management reports, and the consolidated financial statements and management reports and other information as specified in article 1 paragraph 22 Stock Exchange Act 2018 (BörseG). The annual financial statements are only the subject of the review if the company does not prepare consolidated financial statements. The relevant consolidated financial statements are those for the last completed financial year (or the last financial statements approved), together with the half-yearly reports for that year and the current year. The purpose of the review is to confirm in the public interest that the financial reporting is correct. The review does not cover the statutory auditor's audit report.
When does the Enforcement Panel carry out a review?
The Panel's review is carried out by voluntary agreement with the company. If the company agrees to collaborate with the Enforcement Panel in a review, then the responsible officers of the company and other persons assisting those officers are under an obligation to provide the Panel with correct and complete information and correct and complete documentation.
Reviews are of two kinds:
- "Event-driven reviews" where there is good reason to believe that a failure to comply with accounting and reporting regulations has taken place, and that the possible infraction represents a potentially material failure to provide the capital markets with accurate information, so that an investigation is in the public interest.
- "Random reviews" not occasioned by particular events, but following the predetermined review plan.
The Chairman of the Enforcement Panel initiates the review and informs the company in question. If the company in question refuses to cooperate, the Chairman of the Enforcement Panel informs the FMA. If the company in question agrees to cooperate, the Chairman of the Panel initiates the review. A review committee is appointed, consisting of the Chairman and the Vice Chairman of the Panel together with a panel member who acts as independent audit reviewer. Another member of the Panel is appointed reviewer in charge. The review report by the reviewer in charge and the report by the independent audit reviewer are discussed in the review committee, which determines whether the accounting and reporting is inaccurate or misleading.
What are the enforcement priorities?
The enforcement priorities for each year are proposed by the Enforcement Panel and approved by the FMA (section 1(2) RL-KG). The enforcement priorities selected by the European Securities and Markets Authority (ESMA) are taken into account.
Click this link to see the FMA's review priorities for the current financial year.
What is the importance of the review findings?
If the review gives no ground for objection, the company is informed of the fact. If the review reveals that the accounting and reporting is inaccurate or misleading, the Enforcement Panel must justify its findings and give the company a reasonable period of time within which to state whether it accepts the findings.
The Enforcement Panel must inform the FMA of the review findings, and whether the company accepts the findings. The FMA may order the publication of the inaccurate or misleading information and material parts of the justification of findings. The published information and findings must be published by the company in question in accordance with section 10, subsection 3, and paragraphs 3 to 5 of the Austrian Capital Markets Act (KMG) on the company's website, the FMA's website or the website for the regulated market. Where Austria is the home Member State, the company must in any event publish an announcement in the Official Gazette in the Wiener Zeitung stating where publication has taken place. On application by the company, the FMA may dispense with the requirement if publication is likely to jeopardise the legitimate interests of the company. The FMA is officially obliged to pass on to the stock exchange authorities any information that suggests that there may have been infractions of stock exchange regulations.
The Enforcement Panel and the FMA are under an obligation to pass on to the Chamber of Public Accountants and Tax Advisors any information that suggests that there may have been professional negligence on the part of the statutory auditors. The FMA must inform the Working Committee for External Quality Review if there is reason to believe that there are significant deficiencies in the quality assurance measures of a statutory auditor.
When does the FMA take over responsibility for the review?
If a company refuses to cooperate with a review by the Enforcement Panel, the FMA must be informed, and the FMA then takes over responsibility for the review. The FMA must also take over the responsibility if:
- There is reason to doubt either the correctness of the Enforcement Panel's review findings or that the Enforcement Panel has carried out the review correctly
- The public interest in the correctness of the accounting and reporting in particular cases requires review by the FMA in accordance with the principles set out in section 18(1) of the Austrian General Administrative Procedures Act (AVG).
If the FMA's review reveals that the accounting and reporting is deficient, then the FMA must issue an official report detailing the deficiencies.
What are the consequences of the provision of incorrect or incomplete information by the company?
Deliberate failure to provide either the Enforcement Panel or the FMA with accurate and complete information or to submit complete and correct documentation constitutes an administrative offence, for which the FMA may impose a fine of up to 100,000 euro.