Commission stalls over audit liability decision

The European Commission’s ‘can’t do’ attitude towards reforming the auditors’ liability regime has been criticised by the European accountants’ federation.

The Federation des Experts Comptables Europeens (FEE) says in its response to the EC audit Green Paper, published in July, that it ‘regrets the (Green Paper’s) apparent conclusion that the issue is too complex to justify action at EU level’ and is disappointed at the absence of any ‘concrete proposals’. FEE’s reply, filed in Brussels last week, calls for a special study to be carried out on how auditors’ liability can be limited ‘to amounts which reflect the degree of negligence’.

Without action on this front, FEE says, it will be more difficult to implement the Green Paper’s suggestions that auditors should report on ‘going concern’ issues, the effectiveness of internal controls and the environmental behaviour of companies. It adds that a common definition of the statutory audit is probably not possible without a greater degree of harmonisation on civil liability.

FEE also rejects the EC’s proposal that ‘internal rotation’ of audit teams and partners within a firm should be mandatory, as a safeguard against ‘over-familiarity with the client’s management’. This would be unnecessary regulation, it says, adding that continuity in audit teams is ‘usually beneficial to the quality of the audit’.

The Federation says legislation should be introduced to give group auditors legal rights of access to information held in foreign subsidiaries.

The EC is holding a conference on the matters raised in its Green Paper in December.