Brussels, 20/12/2007 (Agence Europe) - “Competition, quality and international cooperation” were “the three key words” for the future of the audit profession, said European Internal Market Commissioner Charlie McCreevy, presenting a package of non-legislative measures for the audit sector to the European Parliament legal affairs committee on Wednesday 19 December. Noting that the “big Four” - the world's four largest audit companies - “account for 85% of audits of listed companies in the EU”, he said he thought that concentration in this sector was “mainly” because of “unlimited, joint and several liability”, which was characteristic for the auditing profession and difficulties for companies in getting “sufficient insurance cover”. He put forward a recommendation to member states to “limit auditor liability” in the “first quarter of 2008”. It would be up to EU member states to determine how to limit this liability. McCreevy said that, in the first quarter of 2008, he would bring forward a further recommendation on “the independence of inspections of audit firms who are engaged in the auditing of listed companies”. This non-binding document would give more responsibilities to the public oversight bodies, strengthen the independence of inspectors and provide more transparency on the outcome of inspections.
In January, the Commission will propose transition measures, to be applied until January 2011, which will allow audit companies in some third countries to continue their activities with non-European companies which are listed in the EU. “We do not have sufficient time … to carry out in-depth equivalence assessments of third country jurisdictions,” he said. Directive 2006/43/EC, which will come into effect at the end of June 2008, on the statutory audit of annual consolidated accounts will require member states to check the quality of the audits of third country companies listed on their soil and to register these companies unless the accounting rules of their country of establishment can be considered equivalent to the EU system.
In 2008, too, the Commission will launch a public consultation exercise on ownership restrictions for audit firms. Often investors, not being professional auditors, are not permitted to own audit companies. The Commission will also launch two studies, one on the possibility of making International Standards on Auditing (ISA) compulsory in the EU, and the other the differences between ISA and the standards used in the United States. “I certainly support the notion of having international standards,” he said, adding, “But it is too early to decide if these standards should be applied in the EU”. (M.B.)