The existing Statutory Audit Directive, also known as the 8th Company Law Directive, was adopted in May 2006. It sets out a framework of principles that Member States are required to implement into their national legislation by 29 June 2008. It also envisages that the European Union will continue to focus on some specific policy areas, such as auditor liability, International Standards on Auditing, inspections of audit firms, and relations with third (non-EU) countries.
Commissioner McCreevy announced his plans regarding the 8th Directive in six areas:
- Auditor liability. Recommendation in first quarter 2008 asking Member States to limit auditor liability. Each Member State would decide the means by which liability is limited – for instance, a liability cap, proportionate liability, or contractual arrangements between the auditor and the audited firm. Liability would not be limited in cases involving wilful misconduct by auditors.
- Restrictions on ownership of audit firms. Public consultation will be launched in the first quarter of 2008.
- Audit quality and inspections. Independent inspections of audit firms that audit listed companies are needed. However, before this could be required, more independent inspectors with sufficient expertise are needed. Meanwhile, the EU should give more responsibilities to the public oversight bodies and, for a transitional period, allow professional bodies and practitioners to take part in the inspection process, with a limited role under the supervision of independent inspectors.
- Implementation of the Statutory Audit Directive. Publish a 'scoreboard' in Spring 2008 showing where Member States stand in implementing the 8th Directive, particularly as regards the establishment of independent public auditor oversight.
- International Standards on Auditing (ISAs). Article 26 of the Statutory Audit Directive allows the Commission to make ISAs mandatory for the European Union. However, the Commissioner's intention is not to make a decision on ISAs at this stage but to look at this issue again towards the end of 2008 – following completion of the IAASB's Clarity Project and studies that the EU will undertake.
- Co-operation with 'third countries'. Under the 8th Directive, Member States are required to register all auditors from outside the EU that audit companies listed in EU markets and to subject them to their systems for overseeing domestic audit firms. However, the Directive allows Member States to exempt auditors from non-EU countries whose oversight system is considered equivalent to the EU system. In January 2008, Commissioner McCreevy will propose transitional measures to allow audit firms from such non-EU countries to continue without registration until 1 January 2011. By then, the EU will complete equivalency assessments of these non-EU oversight systems.
Click to view Planned Revisions to the Statutory Audit Requirements (PDF 80k).