16 March 2004

Commission publishes proposal on statutory audit

The European Commission published the directive on statutory audit in the EU. The proposed Directive would clarify the duties of statutory auditors and set out certain ethical principles to ensure their objectivity and independence, for example where audit firms are also providing their clients with other services. The proposal will considerably broaden the scope of the existing Eighth Council Directive that basically deals with the approval of auditors, by clarifying the duties of statutory auditors, their independence and ethics, by introducing a requirement for external quality assurance, by ensuring robust public oversight over the audit profession and by improving co-operation between competent authorities in the EU. Moreover, a new decision making structure including an audit regulatory committee will allow for swift regulatory responses via the adoption of implementing measures on certain provisions of the proposed Directive.

The proposal also foresees the use of international standards on auditing for all statutory audits conducted in the EU. Adoption of these standards which at present are developed by the IAASB, will be subject to strict conditions, such as the respect of proper due process. A final decision on whether and to what extent to endorse ISAs will depend largely on satisfactory governance arrangements relating to the operation of the IAASB being established.

The proposed Directive would also establish procedures for the exchange of information between oversight bodies of Member States in investigations. In order to lay the foundations for better cooperation with foreign oversight bodies such as the US PCAOB, the proposed Directive would allow reciprocal co-operation with third countries, also based on the 'home country control' principle.

Commission press release
FAQ
Memo by Mr Bolkestein
Commission proposal

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