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Standards & Guidance

European Commission consults on third party auditors

The European Commission is consulting on its supervision of auditors from outside the EU - so-called third party auditors - which was introduced as part of the statutory audit directive passed last year.

The directive requires third-country audit firms to register in each EU Member State where their clients' securities are admitted to trading and estimates indicate that approximately 220 audit firms auditing issuers from about 63 third countries will be affected by these rules.

However, the directive allows for exemptions from registration and empowers the Commission to decide on equivalence of third-country audit systems. If a third-country audit regulation is found to be equivalent, EU member states then have a common ground for assessing third-country audit firms for registration purposes. The consultation seeks views on priorities in equivalence assessment of third countries' audit regulation.

The UK's Professional Oversight Board (POB), which supports the Commission's approach, which it says is attempting to not be too burdensome, has published an overview of the provisions which are likely to have a greater impact in the UK than in most other member states.

Paul George, director of the POB, said, "This directive introduces for the first time regulation of the auditors of non-EU companies listed in London. Due to the large number of companies affected and the significance of the provisions regarding third-country audit firms to UK regulated markets, it is important that UK stakeholders, including audit firms, financial advisers, investors, legal advisers, professional bodies, and the stock exchange, are fully aware of the issues covered by the Commission’s document and fully participate in the consultation."

Member countries have until 28 June to implement the directive and the consultation aims to provide a framework for member states to implement these provisions.

The closing date for the consultation is 5 March. Responses should be sent by e-mail to markt-F4-3rdcountries@ec.europa.eu.

Links

Statutory Audit Directive

Consultation: Relations with Third Countries

Professional Oversight Board

Overview of Consultation

February, 2007

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