Brussels, 17/01/2003 (Agence Europe) - In its comments to be addressed this week to the Federation of European Accountants (FEA) strongly criticised the rules proposed by the Security and Exchange Commission (SEC) the US Exchange Commission for implementing the controversial "Sarbanes-Oxley Act", which last year the USA set up to ensure the independence of its auditors and restore investor confidence in the stock market. In a letter to Jonathan Katz, Secretary of SEC, the FEA explain that they strongly support an exemption for all European auditors from the provisions that are planned, considering that the equivalence of the European Commission's recommendations in this area have to be recognised by the US organisation.
Like the European Commission, the International Federation of Accountants (IFA), which represents the sector in 29 European countries, understands the US trajectory and supports the new legislation in is main aims. However, the FEA believes that the Sarbanes-Oxley Act is dealing with a problem that is essentially US based - "especially as regards their details, are, in our opinion, unnecessary, disproportionate, burdensome, or even impossible to apply" It also believes that he application rules should not go beyond these demands". It is convinced of a fundamental ethical question that cannot be properly treated by the rules alone, bans and/or legislation" and at the risk of making generalisations and creating excessive prohibitory measures, without at the same time being able to understand all the individual cases or the problems that could result. "In the rapidly evolving modern global economy, it is impractical to comprehensively list all possible threats to independence", stresses the Federation and referring to the events of last year in the USA of the framework approach bases on principles that the Europeans and whoever have dealt with problems of independence that have come out of the scandals in the USA.
More specifically, the FEA criticises the SEC for confusing the principles and the rules in the way that the link between the basic principles and the 9 prohibited services planned for services other than auditing are unclear and which does not take into account the degree of materiality, subjectivity or nature of the potential threat or possible safeguards for eliminating or reducing these threats; that the view of auditing activities is too broad; that the impact on individuals other than "key partners" of the auditing company in question; ignores European demands on the function of the auditing committee that could come into conflict with the Sarbanes-Oxley Act; the intention to prohibit audits or offer legal advice to their clients; that it clumsily defines expert services that will be prohibited.