News Release
Frits Bolkestein
No. 27/03
April 24, 2003
EU
concerned about US audit registration step
EU Internal
Market Commissioner Frits
Bolkestein regrets the decision by the US Public Company Accounting Oversight
Board (PCAOB) to require European Union-based audit firms with US-listed clients
to register with the PCAOB. He called for a moratorium of the registration of
EU audit
firms so that effective transatlantic and international solutions can be agreed
upon, in order to restore confidence in financial markets without imposing disproportionate
burdens on EU businesses and audit firms. The PCAOB decision still needs to be
considered by the US Securities and Exchange Commission (SEC).
Commissioner Bolkestein
said:
“Registration of EU audit
firms is unnecessary, burdensome and disproportionate because the EU has already
equivalent systems in place that deal with registration, oversight and external
quality assurance of auditors which are continuously being improved at EU and
national level.”
He added:
"The European Commission
fully shares the goal of having effective audit systems in place in order to prevent
accounting irregularities and restore investor confidence in the securities market.
However, this should be done on the basis of internationally acceptable solutions,
including mutual recognition of equivalent systems of oversight."
Following the requirements
from the Sarbanes-Oxley Act, the US Public Company Accounting Oversight Board
yesterday adopted final rules requiring registration of audit firms with the Board.
These PCAOB rules will need approval by the SEC before becoming effective.
The PCAOB rules require
the registration of US audit firms by October 2003 and foreign audit firms by
May 2004. Failing this, it would be unlawful for audit firms to perform audit
work in relation to issuers in the US, including some 280 EU companies with a
dual listing in the US as well as the EU located major subsidiaries of US listed
groups.
The draft rules imply that
all major EU audit firms will have to register with the PCAOB, that the personal
data of tens of thousands people working for the audit firms should be transferred
to the US and that the audit firms have to give access to audit working papers
and any audit client document.
In the Commission's view,
the best way forward would be a moratorium of the registration of EU audit firms
so that effective international solutions can be agreed. This way forward would
not only reflect a more global approach but would also lead to a better fulfillment
of the PCAOB's mandate of protecting investors in the US. The PCAOB's approach
may lead to mounting pressure to require US audit firms to register in the EU.
That would be unfortunate because it is not in the interest of the audit firms
and not in the interest of the investors who pay ultimately for the cost of registration.
There are fundamental legal
impediments in the EU regarding the transfer of sensitive, personal
data of European audit firm staff to the US as well as concerning access to
audit working papers and audit client documents. The PCAOB has adopted a very
elaborate procedure to avoid a situation where foreign audit firms would have
to break laws in their jurisdiction. However, given the number of serious legal
issues in the EU, the information which could be provided by EU audit firms is
very limited. This reinforces the Commission's view that rigorous home country
control over audit firms is a far more effective way to protect investors.
On these and other Sarbanes-Oxley
Act issues, the European Commission has closely coordinated its position with
all 15 member states. It was at the request of the EU
finance ministers that Commissioner Bolkestein recently wrote to the SEC,
the PCAOB and the members of Congress leading the Senate Banking Committee and
the House Financial Services Committee to underline EU concerns on the registration
of EU audit firms.
The Commission has also
made its position on registration clear to the PCAOB via its comment letter to
the draft rules and by the participation at the PCAOB Roundtable on the registration
of foreign audit firms in Washington.
The Commission will soon
come forward with a Communication on priorities for audit in the EU to continue
and reinforce the Commission's initiatives on statutory audit over the last years.
This Communication will be considered in parallel with a broader Communication
on Corporate Governance which will provide the Commission's response to the
Report of the EU High-level Group of Company Law Experts (Winter Group) of
November 2002.
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Press Contacts:
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Willy Hélin
202-862-9530
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Wilfried Schneider
202-862-9523
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Maeve O'Beirne
202-862-9549
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