EU will require foreign audit firms to register

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15 Feb 2006

In a (PDF 93k) to the US Chamber of Commerce in Washington last week, EU Internal Market Commissioner Charlie McCreevy cited eliminating the SEC's accounting reconciliation requirement between IFRSs and US GAAP as one of the four most pressing Transatlantic regulatory matters.

He also outlined the progress that has been made in capital market reforms in the EU. He indicated that the EU shortly will adopt regulations requiring registration of foreign audit firms that perform audits in the EU. An excerpt:

Take auditing for example. The EU has just put the finishing touches to its new directive on Statutory Audit (the 8th Directive). During its implementation one of the key challenges will be the question of registration of third country audit firms in the EU by 2008. All third country audit firms, including US ones, auditing foreign companies listed in the EU will have to be registered with EU oversight bodies - unless their home country oversight bodies can be considered as equivalent.

Similarly, EU firms auditing SEC registrants will face inspections from the PCAOB in 2006 and 2007. The new EU directive provides for cooperation with the PCAOB on access to audit working papers. These are tricky issues where the EU and the US must have close and pragmatic cooperation or willingness to 'agree to agree' as Bill McDonough, former chairman of the PCAOB, put it. Both sides have to deliver. And both sides must be willing to respect each other's rules and limitations. Deepening cooperation is the name of the game.

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