Minister's EU intervention soothes auditor fears
DTI minister Jacqui Smith believes she has persuaded the European Commission to drop plans for 'criminal sanctions' against auditors failing to comply with a new directive.
Link: Brown promises to tackle audit regulations
The current draft text of the directive on statutory audit and annual accounts said that failing auditors should be dealt with using ‘effective, proportionate and dissuasive sanctions’.
However, a report by the House of Commons European Scrutiny Committee, revealed that the department of trade had written to it saying she had managed to change the wording.
It said Jacqui Smith had detailed the UK’s success in a letter to the committee in early October.
Smith’s letter also told of a failure to extract a regulatory impact assessment from the commission, but said that blocking the proposal for this reason alone would not be the most effective way to secure UK interests in Europe.
The news will come as a relief to some auditors, who had regarded the legislation, published in March, as otherwise mundane.
The directive is designed to clarify the duties of auditors, provides for their independence, ethical standards and introduces a requirement for external quality assurance.
It also provides for public oversight of the audit profession and for improved cooperation between oversight bodies in the European Union.
DTI officials will produce their own impact assessment of the directive following current consultations.
Smith also revealed that the Netherlands presidency was treating the proposals as a priority, and that the UK agreed that the directive would help to raise confidence in corporate financial reporting across the Europe.
The committee expressed concern at the lack of the assessment and withheld formal clearance of the document until it had been produced.