EC unveils independence rules.
The European Commission has unveiled proposals for a pan-European set of audit independence regulations based on principles rather than detailed rules, writes Michelle Perry.
Its proposals, set out in a consultation paper published last month, come just weeks after the US Securities and Exchange Commission unveiled controversial new rule-based audit independence regulations.
The EC’s backing for principles rather than rules reflects the rapidly growing gulf between the US and the rest of the world in regulating audit independence; something that investors and shareholders have warned against.
Guidance on the subject is also being developed by the International Federation of Accountants.
Graham Ward, IFAC board member, commented: ‘The timing of the EC’s document is very convenient for us. We want to make sure there is no conflict between the EC documents and the IFAC principles-approach.’
An IFAC audit group will be reviewing its own draft in February and hopes for an endorsement from Iosco, the club of world stock market regulators, towards the end of next year. The EC is calling for comments on its paper by March 2001.
The EC stepped up its drive into reviewing existing audit rules in member states following the resignation of a British partner of PricewaterhouseCoopers forced by the SEC for perceived independence violations. Internal market commissioner Frits Bolkenstein is rumoured to have said that the Americans are getting too territorial.
– Opinion, page 10.