EC Consults On Adoption Of International Auditing Standards

by Ulrika Lomas, Tax-News.com, Brussels

29 June 2009

The European Commission has launched a public consultation to determine whether International Standards on Auditing (ISAs) should be adopted in the EU. According to a recently published independent study, the benefits of adoption would outweigh the costs. Interested parties have been invited to respond to the consultation by 15 September 2009.

Internal Market and Services Commissioner Charlie McCreevy said: 'The use of international standards, accepted worldwide, for statutory audits in the EU is an opportunity to enhance the quality and credibility of the financial statements of EU companies, to the benefit of investors and citizens. Some say ISAs may not have sufficient international acceptance, while others fear that they may not be fit for the audit of smaller entities. I want to hear more about this and I encourage all those who have a view or experience to share it with us. Hopefully, respondents will find useful elements in the conclusions of a study that we also publish today."

The International Auditing and Assurance Standards Board (IAASB), a board of the International Federation of Accountants, has recently completed a major revision of the ISAs under the 'Clarity' project.

The Commission considers this to be 'an appropriate time', as invited by Article 26 of Directive 2006/43/EC on statutory audits, to examine whether an adoption of the ISAs at EU level would be beneficial to the EU. The International Financial Reporting Standards (IFRS) were adopted at EU level in 2005 with a view to improving transparency and comparability of the financial statements of listed companies. The Commission would adopt the ISAs, with a view to enhancing confidence in financial statements, possibly for the audits of all limited companies in the EU.

A study undertaken by the University of Duisburg-Essen indicated that adoption of the ISAs in the EU would result in quantitative and qualitative benefits for companies, investors and regulators, stemming from high quality and harmonised audits in the EU. Mr Edmund Stoiber, who oversees the reducing of administrative burden for EU citizens in a High Level Group, calls for audits that are proportionate to the size of the audited entities in order to avoid undue regulatory burden on smaller entities. The consultation document considers these aspects and also whether the ISAs have sufficient international acceptance.

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