The European Commission (EC) has requested
Cyprus urgently establish an effective public oversight system or
face rule infringement procedures.

European member states are required under EU
laws on auditing to set up a public oversight system for statutory
auditors and audit firms under national law, which so far Cyprus
has failed to do.

The EU Statutory Audit Directive aims to
ensure investors and other interested parties can rely on the
accuracy of audited accounts. Member states are to do this through
setting up a public body responsible for the public oversight of
statutory audits and audit firms.

Responsibilities of the body include: the
approval and registration of statutory auditors; the adoption of
standards on professional ethics; and for ensuring continuing
education and quality assurance. It also has the right to conduct
investigations where necessary and to take appropriate actions,
such as penalties and sanctions.

There is to
date no guarantee that supervision over audit firms in Cyprus is
conducted by an independent body. Therefore, statutory audits
performed in Cyprus may be considered less reliable by investors
than elsewhere in the European Union,”
the EC stated.

The EC added if Cyprus fails to take
satisfactory measures to remedy the infringement of EU law within
two months, it may decide to refer the case to the EU Court of