A Green Paper on the Role, Position and Liability of the Statutory Auditor
in the European Union (EU) has been adopted by the European Commission on
the initiative of Single Market Commissioner Mario Monti. Existing EU rules
do not adequately address issues arising from the role, position and
liability of statutory auditors. As a result, divergent approaches in
different Member States may adversely affect the quality of auditing,
freedom of establishment for auditing firms and the freedom to provide
auditing services throughout the Single Market. The lack of a harmonised
position also handicaps the EU's ability to influence international
accounting negotiations, a specific objective of the New Accounting Strategy
launched in November 1995 (see IP/95/1234). The Green Paper will therefore
launch a consultation process to establish whether there should be further
EU level initiatives on statutory auditors, and if so what kind of
initiatives. Interested parties are being invited to submit their comments
by 18 October. A Conference on the Green Paper and the comments received is
to be organised by the Commission in Brussels on 5 and 6 December 1996.
"As a result of the process set in motion by this Green Paper," commented Mr
MONTI, "we will be sure that audits throughout the EU are carried out to the
highest professional standards, taking into account the latest international
developments, and auditing services will enjoy the full benefits of the
Single Market".
A requirement for companies' annual and consolidated accounts to be audited
by a qualified professional to ensure that they show a "true and fair view"
and comply with the applicable rules on financial reporting was introduced
for the EC as a whole by the Accounting Directives (namely the 4th Company
Law Directive (78/660/EEC), the 7th Directive on consolidated accounts
(83/349/EEC) and the Directives on the annual accounts and consolidated
accounts of banks (86/635/EEC) and insurance companies (91/674/EEC)). This
requirement protects the public interest by improving the reliability of
financial information published by companies in the EU.
Minimum requirements concerning professional qualifications, personal
integrity and independence to be met by persons carrying out statutory
audits are laid down by the 8th Company Law Directive (84/253/EEC).
However, the 8th Directive does not contain any specific guidance on many
questions which surround the audit function. Some of the issues concerned
are regulated at national level or are the subject of self-regulation by the
accountancy profession.
There are however inevitable differences in the way they are dealt with and
there is often no legislative backing. As a result of these differences,
the Commission considers that the quality of auditing may suffer and that
obstacles can arise to the freedom of establishment for auditing firms and
the freedom to provide auditing services throughout the Single Market.
The Green Paper addresses the following issues which are not covered
adequately by the 8th Directive or other EU rules:
* the role of the statutory auditor in determining inter alia the
accuracy of financial statements, company solvency, the existence of
fraud, respect by the company of legal obligations and responsibilities
to the environment and society
* the contents of the audit report
* the independence of the auditor
* rules on the appointment and dismissal of the auditor
* the level of the audit fee
* the auditing of small companies and groups of companies
* whether the liability of the statutory auditor should be limited
* application to the auditing profession of Community rules on freedom of
establishment and freedom to provide services.
In drafting the Green Paper, the Commission took account of various studies
which have been produced in this field at national and international level.
Interested parties are invited to send their comments on the Green Paper by
post to:
European Commission, DG XV/D.3, 200 rue de la Loi, B-1049, Brussels
or by electronic mail to:
d3@dg15.cec.be
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