General corporate matters: Communication on statutory auditing in the EU

United Kingdom

The Commission has adopted a Communication on the future direction of statutory auditing in the EU. The Communication outlines a work programme, the main areas of which will be reviews of auditing standards, audit quality control systems and rules on auditor independence. This work, to be carried out mainly in the framework of a new committee on auditing, aims to improve the quality and consistency of auditing throughout the Member States.

The Communication addresses fundamental auditing issues, such as standards, content of the audit report and auditors' independence from the company being audited. These issues are not dealt with by the present EU-wide rules on accounting and auditing laid down respectively in the fourth, seventh and eighth Company Law Directives (78/60, 83/349 and 84/253). Audit regimes may differ significantly between Member States, making it difficult for investors and other users to make meaningful comparisons of financial statements audited in different Member States. The problem is likely to become more apparent following the introduction of the Euro.

The Communication follows a 1996 Green Paper which indicated a consensus among Member States, the European Auditing Profession and users of audit reports in favour of action at Community level in the auditing field. The Communication offers a consultative and self-regulatory approach to the regulation of statutory auditing. At this stage, no new legislation or amendments to existing laws are envisaged, but the Commission has indicated that it will bring forward proposals if this becomes necessary in the future.