The move by Brussels follows heavy criticism by Anton Valukas, the Lehman Brothers court examiner, of the part played by Ernst & Young. The EU process will start with the publication of a green paper in the autumn, which could pave the way for rules on the way audit firms are owned and governed.
The European Commission is to scrutinise the role played by auditors adding to a growing international focus on the profession in the aftermath of the financial crisis, which could lead to tighter supervision.
The move by Brussels follows heavy criticism by Anton Valukas, the Lehman Brothers court examiner, of the part played by Ernst & Young, its auditor, in the collapse of the US bank. Mr Valukas claimed there was credible evidence that E&Y did not meet professional standards, particularly related to Lehman’s non-disclosure of off-balance sheet finance.
Although E&Y has vigorously denied the claims, and said it followed US accounting rules, the report has given grist to a growing lobby questioning the purpose of auditors and accounting standards in providing investors with a true picture of the financial health of a company.
Michel Barnier, the new EU internal market commissioner, joined the debate on Tuesday saying that the role of auditors needed closer scrutiny now that the financial turmoil of the past two years was subsiding.
“I’m convinced that it is the right time to launch a real debate at European level on the subject of audit. This conviction is reinforced by the questions recently raised in the context of the audit of the accounts of US bank Lehman Brothers,” Mr Barnier said.
The EU process will start with the publication of a “green paper” in the autumn, which could pave the way for rules on the way audit firms are owned and governed.
The green paper will also cover issues such as the concentration in the audit market and its implications on financial stability, the emergence of small and medium-sized practitioners, the audit of smaller companies and international standards on auditing.
© Financial Times
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