The result of broad consultation with the auditing industry in the European Union, the recommendations come in response to the Enron crisis and collapse of audit firm Andersen.
The new principles deal with two main issued raised by the Enron scandal; namely the provision of additional services to audit clients and the employment of former auditors by the audit client.
Frits Bolkestein, internal market commissioner, said: ‘Trust in the independence and objectivity of auditors is vital for the efficient functioning of the EU’s capital market. It is essential for business integrity, shareholder confidence and consumer and employee protection. Audits must be seen as adding credibility to financial statements.’
Regulation of auditor independence differs greatly between member states at present. The EC intends the new recommendations, although not legally binding, to be the benchmark for all audit firms. If compliance falls below expectation the Commission plans to legislate on the issue.
Bolkestein added: ‘Although I am pleased that some member states have already stated implementing measures in line with this recommendation, I now expect its rapid application throughout the EU. Let me be clear: if that does not happen, the Commission will not hesitate to propose more robust, binding measures.’
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