‘There are currently no agreed auditing standards in the EU and no European mechanism to deal with such supervision,’ the paper notes, adding that the commission will present later this year a discussion paper on auditing strategy.
Prior to this, Brussels will issue formal guidelines requiring that auditors provide proof that none of their actions or relationships had compromised their independence.
Furthermore, the latest paper says that legislative measures to prevent ‘false or misleading signals from financial analysts’ general recommendations or from stock valuations by credit rating agencies’ will be considered by the EU.
A high-level group of company law experts is to review the role of non-executive directors and supervisory boards; management remuneration; and the responsibility of management for the preparation of financial information, the paper said.
On transparency, the report expressed concern that ‘complex derivative instruments can escape proper supervision, in particular when the trading takes place on non-regulated markets’.
The document said that because of Enron, the European Commission will support a ‘concerted political effort’ to persuade the US authorities to accept international accounting standards for financial statements by EU companies seeking a securities market listing in the US.
In the UK the Department of Trade and Industry has also initiated an investigation of audit regulation.
The Financial Services Authority and Treasury officials are all currently gathering information.
Among the many suggestions for change in the UK are compulsory rotation, or compulsory retendering, for auditors, beefing up the roles of non-executive directors and imposing a mandatory limit on the volume of consultancy work undertaken by an audit firm with an audit client.
Simon Wright of CareersinAudit.com discusses how an effective cyber defence force is critical to businesses worldwide and how internal auditors can make the transition to a new career in cyber security
The FRC has said that the investigation will 'consider, but not be restricted to, issues regarding misstated accounting balances'
Craig Maxwell joins the audit and assurance team in Scotland
Stephen Grayson to join the audit department in Manchester