EU Comission proposes tough new auditing rules
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EU Comission proposes tough new auditing rules

The European Commission has proposed tough new auditing standards in order to prevent future accounting scandals.

The proposals include:

  •  EU member states must establish "more robust" oversight boards, similar to the US Public Company Accounting Oversight Board.

  • Audit firms from outside the EU must register in each EU state where they do business, just as foreign firms will soon have to register in the US.

  • The group auditor for an EU company must review the work of other auditors and take full responsibility for the company's consolidated accounts.

  • As in the US, a company must set up an independent audit committee to select its auditor and oversee the process.

  • However EU audit firms would not be prohibited from offering consulting and other services, as they are in the US. Instead, they would be prohibited from offering auditing services below cost with the intent of charging more for other services.

  • EU member states must introduce rotation of audit firms every seven years or rotation of audit partners every five years.

The commission also called for cooperation with other corporate regulators, especially the PCAOB.

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