Bolkestein to herald global auditing plans

Date: 10/01/02

By Peter Chapman

SINGLE market chief Frits Bolkestein is set to unveil plans for a switch to global auditing standards to match a new EU regulation on international accounting methods.

The move would make it even easier for investors across the Union to compare the performance of companies. It follows calls from industry for an effort parallel to legislation that would force most EU companies listed on stock markets to comply with the London based International Accounting Standards Board by 2005.

Michael Groom, president of the Institute of Chartered Accountants of England and Wales, said 'it makes no sense' for accountants using new international standards to be audited under divergent local norms.

The switch to international accounting standards is meant to make it easier for firms to seek capital on foreign stock markets. Under the audit plan, Commission sources say auditors across the EU would follow standards set by the International Auditing Practices Committee (IAPC) of the global accounting body, the International Federation of Accountants (IFAC). Groom said a parallel switch to international auditing rules would spur the integration of fragmented EU and global capital markets.

'We have put in our view on this to the Commission saying we should have global standards in place for 2005,' he said. 'That is a massive task, but it amazes me how we can have a single currency but say standards for auditing can vary from country to country.'

Robert Hodgkinson, chair of the auditing group of the European Federation of Accountants (FEE), said the rules should apply not just to companies listed on stock exchanges - the target of the accounting standards law - but to any companies whose accounts must be audited.

But Hodgkinson, an Arthur Andersen partner, said the Commission should not call for national regulators to ditch any national rules that are more stringent than international norms.

The call for convergence in the accounting and auditing requirements follows a damning report by the Commission on economic integration, which found that national-based systems are nurturing inefficient business practices and costing billions of euro a year.

The audit move - expected to be launched once EU member states have given their opinion - is likely to be in the form of a non-binding recommendation rather than a regulation which becomes law in every member state once it is adopted.

Experts said this was because audit standards are already very similar from one country to another - and the switch would represent less of a revolution than the switch in accounting rules.

Single Market Commissioner Frits Bolkestein is set to unveil plans for a switch to global auditing standards to match a new EU regulation on international accounting methods.