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The paper was presented by Commissioner Bolkestein to the informal meeting of Economics and Finance Ministers in Oviedo on 12-14 April. Ministers welcomed the paper and endorsed the Commission's proposal to ask its High Level Group of Company Law Experts to review further corporate governance and auditing issues in the light of the Enron case.
The paper highlights policy initiatives in five priority areas:
Financial reporting
Early adoption and strong enforcement of the proposed EU Regulation on International Accounting Standards, so that IAS will be used throughout the EU for all listed companies from 2005 (with some exceptions allowed until 2007). Furthermore undertake political effort to persuade the US authorities to give IAS and US-GAAP equal treatment.
Statutory Audit
The Commission will shortly issue a Recommendation on auditor independence. The auditor has to demonstrate that none of his actions or relationships has compromised his independence. A Communication on future priorities for auditing strategy will be issued lather this year. Supervision of the audit profession must be enhanced as there are no agreed auditing standards in the EU.
Corporate Governance
The High Level Group of Company Law Experts will review further corporate governance and auditing issues, including the role of non-executive directors and of supervisory boards, management remuneration, and the responsibility of management for the preparation of financial information. Preliminary conclusions and proposals for reform will be discussed at the June Council of Finance Ministers and at the Seville European Council in June. The final conclusions will be presented to the informal meeting of EU Finance Ministers in September.
Transparency
The Enron affair has demonstrated a lack of transparency in the international financial system. The Commission will invite the Committee of European Securities Regulators to report on supervisory issues related to derivatives and derivative trading. Complex derivative instruments can escape proper supervision, in particular when the trading takes place on non-regulated markets.
Financial analysts and rating agencies
The Commission will also assess, notably within the consultation process on the Investment Services Directive, possible measures to ensure that the market does not receive false or misleading signals from financial analysts' general recommendations or from stock valuations by credit rating agencies.
See full ENRON paper