More NewsBig Four challenge French government

Big Four challenge French government

  French law on audit code of practice attacked by big firms

The Big Four and Grant Thornton have taken the French government to the
country’s highest court in a bid to annul a new code of practice that could
limit their rights to offer advisory and assurance services.

The hearing, which took place last week before the Conseil d’Etat,

was seeking to revoke the Ministry of Justice decree that made into

law the code created by accountancy

regulator, Haut Conseil du Commissariat aux Comptes, or H3C. A response from
the Conseil on whether to annul the code is expected later this month.

In November, the government’s acceptance of the restrictive code on the
‘Deontology des commissaries aux comptes’, or practice rules for accountants,
has angered the Big Four in France.

The H3C’s November 2005 code said that an accounting firm may

not audit a client if advisory services have been given to the company within
the preceding two years. The code will have a global remit and take into account
advisory work from accounting firms given to companies’ operations outside of
France.

In France, all companies are dual audited by two firms. If a major company
sought to change its Big Four auditors it may find the other Big Four firms have
already provided it with advisory services in the last two years.

One Big Four French partner, who refused to be named ahead

of the court’s response, said: ‘This

is a fight for the companies too. Because of this (code) they won’t get the
best advice.’

The code also increases transparency requirements for accountants, demanding
they reveal the full structure of their global networks, as well as any
professional or family links an individual accountant may have to a client.

This latest restriction on auditors follows on the heels of the 2003 ‘Loi de
Securité Financiere’. The Enron scandal-inspired law forced accountants in
France to spin off some key advisory services, such as legal advice, and limited
the right to audit and offer advisory services such as tax advice at the same
time.

One professional body for French accountants, the Institut des Experts
Comptables et des Commissaires aux Comptes (IFEC), which has joined the
annulment campaign, said in a statement: ‘This contentious action is necessary.
Like all legal action the result is not guaranteed. However, taking into account
the importance of the code’s text (this action) is indispensable.’

Accountancy and accounting standards have proved controversial recently in
France. President Chirac famously became involved in the debate over IAS39,
saying it would have ‘nefarious consequences for financial stability’.

The French remain unhappy with the standard and are lobbying the IASB for
changes. French experts say the IASB could improve its standard setting
processes.

But observers believe that the favourites to be the next president are much
keener on modernisation, and may be less likely to stand in the way of
international standards.

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