The EC has set timelines for
consultations and recommendations on six key audit issues. European
Commissioner for Internal Market and Services Charlie McCreevy
outlined the audit package before the European Parliament’s
Committee on Legal Affairs. It includes timeframes for EC activity
on auditor liability, audit firm ownership restrictions, audit
quality and inspections, the implementation of the Statutory Audit
Directive by member states, International Standards on Auditing
(ISAs) and co-operation with third countries.

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McCreevy said he intends to put
forward, in the first quarter of 2008, a recommendation to member
states asking them to limit auditor liability. “I do not intend to
impose the means by which liability is limited. This will be for
each member state to decide,” he said. “Existing solutions such as
a liability cap, proportionate liability or indeed a contractual
arrangement between the auditor and the audited firm would all seem
adequate means to deal with this issue.”

Strengthening independence

The commissioner plans to launch a public
consultation on the ownership restrictions in audit firms and issue
a recommendation on the independence of inspections of audit firms
that are engaged in the auditing of listed companies.

“In substance, this recommendation will give more responsibilities
to the public oversight bodies, strengthen the independence of
inspectors and provide more transparency on the outcome of
inspections,” McCreevy said.

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McCreevy said he intends to present a scoreboard of the
implementation of the 8th Directive in spring 2008, describing
where member states stand in regards to independent public auditor
oversight. It is aimed at naming and shaming member states.

McCreevy said the EC also needs to decide what will happen with the
audits of third country companies listed in the EU when the
Statutory Audit Directive becomes effective. In terms of ISAs,
McCreevy said it is too early to decide whether they should be
applied in the EU.