EU parliament adopts ISAs
29 Sep 2005
On 28 September 2005, the European Parliament approved various amendments to the Eighth Company Law Directive (the 'auditing directive').
The amendments will:
- Establish a system for public oversight of the auditing profession and for cooperation between Member States' authorities.
- Require application of International Standards on Auditing (ISAs) in European auditing. ISAs are issued by the International Auditing and Assurance Standards Board of IFAC. The EC press release announcing the Parliamentary vote said "adoption of these standards 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.
- Create an Audit Regulatory Committee to complement the revised legislation and allow the speedy adoption of necessary implementing measures.
- Require rotation, every seven years, of the key audit partner/statutory auditor. However, compulsory rotation of audit firms was rejected.
- Provide a basis for effective and balanced co-operation between regulators in the EU and with regulators in third countries, such as the US Public Company Accounting Oversight Board (PCAOB).
- Improve the independence of auditors by requiring listed companies to set up an audit committee (or a similar body) with clear functions to perform.
