PracticeAccounting FirmsEU rules out ban on non-audit work

EU rules out ban on non-audit work

The European Commission has avoided an outright ban on statutory auditors carrying out additional work for client companies, although proposals issued today insist on avoiding conflicts of interest.

Link: France set to impose auditor restrictions

The tabled directive insists auditors or audit firms are ‘independent from the audited entity and not in any way involved in management decisions’.

Furthermore they should not conduct audits if any relationship or additional services ‘might compromise (their) independence’.

The comprehensive and detailed directive was motivated by the Parmalat and Ahold scandals, and includes rules on auditing EU multinational firms.

They insist the auditor of a group’s consolidated accounts – based in its home country – take full responsibility, reviewing other auditors’ work.

A European audit regulatory committee would be created to adapt these regulations. EU internal market commissioner Frits Bolkestein said: ‘Auditors are our major line of defence against crooks who want to cook the books. Parmalat was a reminder of what happens when that defence fails.’

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