FEE urges EU member states to
apply consistent network definition

European member states should
ensure consistent use of the definition of networks of audit firms
within the European internal market, according to the European
Federation of Accountants (Fédération des Experts Comptables
Européens – FEE).

FEE suggests the use of the International Federation of
Accountants (IFAC) code of ethics as guidance to implement the
network definition in the EU would prevent harmful consequences.
The federation said inconsistency will threaten legal certainty, be
unworkable in practice and raise compliance costs.

The statement from FEE follows a survey of current network
definitions used in the 27 EU member states, Norway and
Switzerland. Commenting on the findings of the survey, Jacques
Potdevin, president of FEE, said: “National legislators or
regulators should consider the use of the IFAC code of ethics
guidance in European member states to promote consistent
application of the network firm definition internationally. A
definition of ‘network’ is first and foremost a response to
cross-border issues in relation to international associations of
audit firms, therefore harmonised definitions will provide
efficiency and simplification.”

FEE chief executive Olivier Boutellis-Taft said it is difficult to
think of an internal market with 27 different definitions in which
firms would be considered in or out of a network depending on
different interpretations.

“Furthermore, such a patchwork of national definitions will hamper
the international development of networks of mid-sized audit firms
at a time where ways to increase choice on the audit market is
being discussed,” Boutellis-Taft said.

FEE ethics working party chairman Michael Niehues said there is
also a need for clarification by means of further guidance on some
ambiguous terms in the network definitions. “The European
Commission is encouraged, with advice from the European Group of
Auditors’ Oversight Bodies, to enhance legal certainty by
initiating a process to prepare and provide guidance to the EU
member states to implement and apply the network definition,”
Niehues advised.