EC set to launch audit watchdog

Link: Ahold scandal threatens exemption from US rules

Last week,at the ICAEW’s conference in Bruges, Karel van Hulle, head of financial reporting and company law at the EC’s internal markets directorate, said proposals on regulation of audit had been tabled for discussion.

Although van Hulle would not give details of the forthcoming policy he said the commission had to respond to calls for improved public oversight to restore investor confidence.

It is unclear whether the EC’s intention is for a new power to impose sanctions on auditors but observers believe it can only mean the creation of a board similar to the Public Company Accounting Oversight Board set up in the US.

Van Hulle’s remarks followed news that a $500m (£317m) hole had been found in the accounts of Ahold, the Dutch food company. Ahold’s problems were made public when auditor Deloitte & Touche refused to sign off the accounts.

Experts believe a European-wide oversight panel is necessary. ICAEW technical director Robert Hodgkinson said that, as new accounting standards were beingadopted throughout the EC in 2005, it is necessary to have a central oversight panel for supervision.

Hodgkinson said that the new panel’s task would be to govern the principles of the new standards, to share ideas on their application, and to demonstrate that there was a central authority.

But he added that, because of national traditions, it would be impossible to give the panel the ability to impose sanctions.

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