21 May 2003

Commission: Ten priorities to improve audit of company accounts

The Commission released a Communication on “Reinforcing the Statutory audit in the European Union”, proposing ten priorities to improve and harmonize the quality of statutory audit throughout the EU, complementing the Commission's Action Plan on company law and corporate governance.

The plan announces forthcoming proposals for new EU laws to radically overhaul existing legislation and to extend it. The plan is divided into short and medium-term priorities. Among the short-term ones are strengthening public oversight of auditors at Member State and EU level, requiring ISAs (International Standards on Auditing) for all EU statutory audits from 2005 and the creation of an EU Regulatory Committee on Audit.

In the short term, the Commission proposes to modernise the 8th Company Law Directive to ensure a comprehensive, principles-based Directive applicable to all statutory audits conducted in the EU, which also includes the creation of an Audit Regulatory Committee. The Commission will adopt, in accordance with comitology procedures, the implementing measures necessary to underpin the principles set out in the modernised 8th Directive.

Other short term measures include:

Strengthening public oversight of the audit profession, and

Requiring International Standards on Auditing (ISAs) for all EU statutory audits

Medium-term priorities include:

Improving disciplinary sanctions

Making audit firms and their networks more transparent

Corporate governance: strengthening audit committees and internal control

Reinforcing auditor independence and code of ethics

Deepening the Internal Market for audit services

The Commission hopes that a legally underpinned comprehensive audit regulatory and supervisory environment in the EU will be least equivalent to the regulatory systems currently being developed by the US PCAOB (Public Company Accounting Oversight Board).

Commission press release Communication

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