Updated news story on amendment of EU 8th Directive
09 Oct 2005
In a news story of 29 September 2005, we reported that a revision to the EU 8th Company Law Directive (the "auditing directive") approved by the European Parliament would adopt International Standards on Auditing (ISAs) for use in Europe.
We also reported that the Parliament rejected the Commission proposal that all publicly listed companies must have a separate audit committee to supervise financial reporting procedures on grounds of excessive financial and administrative burden. Our report was based on an titled No to Compulsory Audit Committees (PDF 95k). Subsequently, the EC issued a (PDF 22k) clarifying that:
- "Adoption of [ISAs] will be subject to strict conditions such as their quality and whether they are conducive to the European public good" – conditions similar to those required for IFRSs under the EU Accounting Regulation.
- An Audit Regulatory Committee will be created to complement the revised legislation and allow the speedy adoption of necessary implementing measures – a body similar to the Accounting Regulatory Committee that must endorse each IFRS for use in Europe.
- Listed companies are required to set up an audit committee (or a similar body) with clear functions to perform.