Europe needs a coordinator
By David Devlin
The European Federation of Accountants’ recent call to strengthen public oversight generated a lot of interest. This is because FEE’s recommendations address a fundamental issue for the European accountancy profession.
In the post-Enron world, the profession is keen to play its part in the process of restoring credibility to financial reporting. Confidence in public oversight of the audit profession is a prerequisite to achieving high-quality financial reporting.
Hence, FEE, which represents more than 500,000 accountants throughout Europe, believes that to achieve robust oversight of the auditing profession, there is a corresponding need to create a European coordination body, in addition to member state oversight systems.
Just to be clear, the coordination of audit oversight would not aim to be a European regulator (or a replica of the PCAOB). Rather, its role would be clearly defined and involve coordinating the national systems and addressing what the European Commission has flagged as a potential future concern – cross-border issues.
FEE supports the development of a robust oversight system for the auditing profession working in the public interest. And it proposes a preference for the body to comprise mostly lay members as well as accountants.
FEE also believes that public oversight structures are best organised at member state level. In addition, there is a need for an EU coordination mechanism. Its aim would be to develop proposals for common principles and essential features for the organisation of the national public oversight bodies. It would suggest improvements to arrangements and oversight procedures at member state level.
The European coordination body should be visibly structured in the public interest and involve all stakeholders. It should be established as a legal entity to be effective and ensure confidence.
Robust oversight will guarantee public confidence in an audit profession that is committed to working in the public interest at the highest levels of quality.
- David Devlin is FEE president.
Regulation can go too far
By Michelle Perry
The UK audit profession is still reeling from the extraterritorial reach of the US’ Sarbanes Oxley Act and the role of the new Public Company Accounting Oversight Board.
No sooner have the full implications of the Act and the new body on UK auditors been digested, than pressure for more audit oversight emerges.
This time it is from the this side of the Atlantic. The European accountancy group, FEE, is proposing that EU member states’ auditors be subject to pan-European oversight.
The UK already has a highly effective Auditing Practices Board working under the aegis of the revamped Financial Reporting Council, which took over as the UK accountancy industry’s main regulator this year.
Few of the other 14 member states have such a respected financial reporting system or standard setting body equal to that of the UK. The Brussels-based FEE proposes a new audit oversight body develop common principles.
Would then, the UK be forced to moderate its audit quality in rules, processes and oversight?
And where does that leave the IAASB, the global audit oversight and standard setting body? There is a concern that politics could enter the game, distorting the aims of either the European or global body.
More to the point, who would pay for it? Would it be the commission?
Or would the onus fall on listed companies? Such a move in the UK wouldn’t go down very well at present given that the FRC will soon have to go cap in hand asking for more money to fund its evolution to proactivity.
And what kind of authority would the new body have?
There are many questions to be answered before yet another layer of regulation is placed on top of the existing ones in the name of ensuring and promoting high-quality audits.
Everyone wants audit quality to remain high and for the public trust and confidence to be restored. But the danger is these fine ideas, overlapping structures and many voices may just prove to confuse not only the public, but the very companies that need auditing and the auditors themselves.
- Michelle Perry is features editor of Accountancy Age.
The second largest improvement in ‘significant’ levels of financial distress since the EU Referendum was in professional services, found research from Begbies Traynor
Two new audit partners have been appointed at the firm BDO in its audit practice following continued growth and investment
Investment in people, tech and businesses impacts on EY's profit per partner figure
If businesses do not take cyber security seriously in their business planning regulators may do it for them, the ICAEW has warned