13 May 2008

Commission recommendation to strengthen confidence in statutory audit

The recommendation suggests strengthening the role of the public oversight authorities in inspections. Independent oversight bodies should play an active role in the inspections of audit firms. Professional associations should no longer take the lead in o

The recommendation suggests strengthening the role of the public oversight authorities in inspections. Independent oversight bodies should play an active role in the inspections of audit firms. Professional associations should no longer take the lead in organising inspections.

 

The recommendation invites Member States to strengthen the independence of the inspection system and teams. It suggests that the necessary policies and procedures have to be in place to make sure that inspectors, experts and the management of the quality assurance system are objective and independent in performing their duties.

 

The main features of the Recommendation:

- It recommends an active role of the public oversight authorities in inspections. Professional associations can still assist the public oversight authorities, but should be subject to important safeguards, including accountability to the public oversight authority.

- The Recommendation invites Member States to clarify that practitioners from audit firms (peers) should no longer have a leading role in inspections system and inspections teams.

- It also recommends to Member States to enhance transparency on the outcome of the inspections in order to improve accountability of the inspection system towards investors, companies and other stakeholders. The transparency reports published by audit firms should contain no misleading information in comparison to the findings of inspections. Major deficiencies in internal controls of audit firms should be disclosed if an audit firm does not address appropriately the recommendations for improving the audit quality.

 

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