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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:


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