Bolkestein threatens retaliation against American audit law

Date: 22/05/03

By Peter Chapman

FRITS Bolkestein, the internal market commissioner, has stepped up his fight to persuade the US to drop onerous demands on the Union's auditing profession.

Under legislation brought in by the Sarbanes-Oxley Act, following the Enron and other corporate scandals, EU-based auditors will have to meet strict US rules and register with the new Public Company Accounting Oversight Board.

But Bolkestein has pledged to win an exemption for EU firms. Speaking at a news conference where he unveiled a raft of proposals on auditing and corporate governance - the EU's more measured response to the corporate scandals - the Dutchman threatened to impose similar controls on US-based firms if American authorities did not soften their approach.

He insisted that Europe is already imposing checks and balances on auditors and that the new EU safeguards would reinforce these controls.

"Let me tell our American friends, we shall regulate ourselves," he said.

However, Bolkestein played up his chances of reaching a deal, heaping praise on William McDonough, the New York central banker heading the new Board.

"We know him for his reasonableness and international outlook," said Bolkestein, adding that McDonough had chaired talks on the new banking rules known as Basel II.

Bolkestein wants EU auditing firms to use internationally recognised standards by 2005. He also intends to launch a directive covering public oversight, external quality assurance and codes of ethics.

Instead of a US-style oversight committee, he plans to beef up national watchdogs - although there will be better coordination at European level.

In his paper on corporate governance, the internal market chief rejected a pan-European code imposing strict rules on companies and directors.

But he called for the Union to adopt common rules in a few key areas.

Firms should publish an annual corporate governance statement, giving details of the corporate governance structures in place; shareholders' rights should be improved and checks on 'fat cat' executive salaries should be improved.

Under new US legislation, EU-based auditors will now have to meet strict US rules and register with the Public Company Accounting Oversight Board.