European Commission sets out priorities to improve audit quality

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22 May 2003

The European Commission has published a 10-point plan for improving and harmonising the quality of independent audits throughout the EU.

Approximately two million European companies are required by statute to have an annual audit. To implement the plan, existing European legislation (particularly the 8th Directive) will be revised and extended. The plan is divided into short and medium-term priorities:

Short-Term Priorities (2003-2004)

  • Modernise the 8th Directive to include principles on public oversight, external quality assurance, auditor education and independence, code of ethics, auditing standards, disciplinary sanctions, and the appointment and dismissal of statutory auditors.
  • Create an EU Regulatory Committee on Audit, with power to adopt detailed binding auditing regulations (the present EU Committee on Auditing, renamed the Audit Advisory Committee, composed of representatives of Member States and of the profession, will become an advisory committee).
  • Strengthen public oversight of auditors at both the member State and EU levels.
  • Require International Standards on Auditing (ISAs) for all EU statutory audits from 2005.
Medium-Term Priorities (2004-2006)
  • Improve disciplinary sanctions.
  • Make audit firms and their networks more transparent, including disclosure requirements for audit firms.
  • Strengthen audit committees and internal controls.
  • Reinforce auditor independence and code of ethics (including seeking US recognition of the equivalence of the EU approach).
  • Remove restrictions on the establishment of EU audit firms and on cross-border provision of audit services.
  • Examine the economic impact of auditor liability regimes in member States.
Click for EC Announcement (PDF 79k) and Full Text of Plan (PDF 82k)

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