The issue? Whether non-US auditors should be made to register with the relevant authorities across the Atlantic if they work on the accounts of US subsidiaries or any company with a US listing.
Ultra-sensitive in the wake of Enron and WorldCom, US regulators are playing hard ball insisting that foreign auditors register in the States.
The EC, in the shape of Frits Bolkestein, the commissioner for internal markets, is furious and is launching all kinds of counter threats. The UK, meanwhile, appears to be taking the position of conciliator, one that it has become familiar with in recent times.
Where will it end up? Right now it’s difficult to tell. Though this is a diplomatic spat without any kind of glamour, small issues likes these can have a terrible tendency of running out of control for years at a time. (Remember the banana wars in which the EC and US clashed over trade tariffs on the fruit?)
The US however is generally in no mood to make concessions to Europe over anything. Put aside US obsessions with rules to safeguard company integrity and investor money and you still have the deep disappointment felt in the US over Europe’s reaction to a war in Iraq.
It’s worth recapping where everybody stands at the moment. The US is adamant that foreign auditors should be registered if they are going to work with companies listed there. This would involve hundreds of firms across Europe going through the process of filling in forms for the US and represents the cross-border extension of US regulation.
An outraged EC believes this to be out of order. After all, it argues, audit firms in Europe can claim to have a much better record than their counterparts in the US. Indeed, the UK has always argued it has already gone through the painful process of cleaning up audit and accounting in the wake of the Maxwell disasters and BCCI.
Bolkestein has however taken exception to the US actions. He has called their measures ‘unnecessary, burdensome and disproportionate’. And to make sure the US knows just how angry he is he has threatened to make sure US auditors working for European companies have to register in each and every EC state.
As ever Peter Wyman, president of the ICAEW, has stepped forward to find a way through. He is hoping that the extension for registration from October this year to April 2004 will provide a breathing space for further negotiations. In truth he’s hoping that he can soften the positions of both the US and EC.
On the one hand he’s offering a mutual exchange of information deal between European and US regulators that aims to reduce the burden on non-US firms.
And on the other he’s attempting to persuade Bolkestein to soften his stance and find a way to be more conciliatory.
If Bolkestein cannot however manage that, Wyman has signaled that UK patience is not endless and that a separate bilateral deal with the US might be sought.
There is one major issue that both Bolkestein and Wyman will have to take into account. The man in charge in the US – William McDonough. As the new head of the Public Company Accountancy Oversight Board he will not want to be seen to be giving into Europe as one of his first acts.
With that in mind it may be more difficult to get the US to budge than either Bolkestein or Wyman think.
To keep up-to-date with the news, go to www.accountancyage.com.
The second largest improvement in ‘significant’ levels of financial distress since the EU Referendum was in professional services, found research from Begbies Traynor
Two new audit partners have been appointed at the firm BDO in its audit practice following continued growth and investment
Investment in people, tech and businesses impacts on EY's profit per partner figure
If businesses do not take cyber security seriously in their business planning regulators may do it for them, the ICAEW has warned