EU pushes for spring audit deal

Link: Big Four finds lucrative market in Europe

Its confidence was based on a common approach agreed before Christmas by EU finance ministers, which will now be presented to MEPs. EU president Jan Peter Balkenende is hopeful the legislation can be agreed in one reading, instead of the usual two.

The proposed legislation was drafted in the wake of the Parmalat and Ahold scandals, and was designed to ensure auditors are ‘independent from the audited entity and not in any way involved in management decisions’.

If MEPs and ministers agree, they could be banned from conducting audits if any relationship or additional services ‘might compromise (their) independence’.

The Dutch government said: ‘Probably the agreement among ministers is a good basis to reach an agreement with the European parliament in a common first reading.’

This would allow the directive to come into force in the middle of 2005, with member states then having 24 months to comply. ‘The directive should contribute to restoring confidence in the quality of statutory audits and, with that, in the financial data of enterprises,’ said the Hague.

The introduction of the directive could also be beneficial for European auditors working with US clients. At a recent speech in Brussels, William McDonough, chairman of the US Public Company Accounting Oversight Board, said the aims of the directive ‘mesh quite well with the oversight system we are putting in place’.

He added that influential parties in the US recognised the huge steps Europe was taking in introducing new safeguards for audit. A favourable response to the audit directive in the US could see the burdens of registration with the PCAOB reduced significantly.

French finance minister Herve Gaymard abstained from the vote on the draft directive. In particular the French want rules to prevent accountants from providing other consulting services to clients they audit.

Related reading