Link: ‘New’ FRC hold-up
While the broad thrust of the plans were welcomed by all, many took exception to some parts of the 10-point plan. The proposals seek to introduce a new regulatory framework for audit across the EU using a principles-based approach. Of particular concern to KPMG was the decision by the EC to look at the impact of restricting the non-audit work from firms for their audit clients. ‘Numerous studies have so far failed to demonstrate a link between the provision of non-audit services and decreased audit quality,’ said Neil Lerner, head of regulatory issues at KPMG.
The firm also felt that the mention of a study on the economic impact of auditor liability regimes, to take place in the medium term, is not enough of a concrete step.
‘The commission has effectively ruled out the possibility of finding a solution to modernise the laws relating to liability across the EU,’ said Lerner. ‘It is unclear what the suggested study will achieve.’
However the ICAEW saw this issue in a completely different light to KPMG. ‘We are particularly pleased that the commission has signalled a desire to look further at the case for the reform of auditor liability, which the institute has identified as a major issue for the global accounting profession,’ said ICAEW president Peter Wyman.
Many of the steps proposed by the commission, such as a new company directive on auditing and the creation of a new audit regulatory committee, are a direct reaction to the perceived influence of the US-based Sarbanes-Oxley Act.
Firms with clients listed in the US will have to register with public company accountancy oversight board, a requirement the commission is vehemently against.?I do not accept the imposition of US standards on our firms,? said internal market commissioner Frits Bolkestein. ‘The EU will regulate its own business.’
However ACCA believes time is not on their side over this issue.
‘The proposals will take time to implement and may not prevent the US from pursuing its recently announced April 2004 registration deadline for non-US audit firms,’ said ACCA chief executive Anthea Rose last week.
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