Transparency and flexibility are keys to audit reform

26-Mar-2013 @ 15:0

Sajjad Karim Sajjad Karim

Anthea McIntyre Anthea McIntyre

Anthea McIntyre Anthea McIntyre

Reform of Europe's auditrules must encourage much greater transparency and openness as well as betterquality of audit, a conference in the European Parliament heard today.

Sajjad Karim, lead MEP in the European Parliament on auditreform, said the role and needs of investors must be central to proposedchanges.

The Conservative MEP for North-West England wasspeaking a conference on the potential impact of reform on investors, which heorganised with the co-operation European Federation of Financial ServicesUsers.

In his keynote speech he told delegates: "Discussionson how to reform the audit profession have been ongoing at European level forsome time now, and in the Parliament in particular we have been workingfeverishly on this issue for the past year or so.

"I believe when trying to find an agreement we shouldnot depart from the headline aims...to create a framework that supportsimproved audit quality, rather than solely increased audit quantity.

"We need to look to deliver a system which ensures independence,rather than one which enables the continuation of cosy relationships.

"Finally, we must encourage a much greater degree oftransparency and openness, rather than maintain the present opaqueness whenimportant decisions are taken as part of the audit process.

"The place of the investor in this audit reform issometimes lost amidst an endless discussion about the number of years beforerotation or the respective perils of a particular advisory service, but Ibelieve their role and needs should be one of our key considerations.

"If we want the financial statements of a company to bemore than a snapshot in time to which investors can refer, and instead to be adocument more fundamental to the governance of the company and the interests ofshareholders, creditors and future investors, then the role audit plays forthose three stakeholders is paramount.

"Audit therefore needs to work to the desires of aninvestor, both in terms of shareholders looking for comfort that their companyis in safe hands, and the investor who wants assurance that the data informingtheir decisions is reliable.

"Often when meeting stakeholders and discussing withcolleagues...we come up against the problem that a Regulation will not besympathetic to the various national company law traditions and approaches usedacross the Union.

"I believe therefore that we must address many of thesequestions by way of a Directive, which ensures a degree of flexibilitynationally as to how to achieve the aims that the Commission and I share. Wewill not serve European shareholders and investors well by imposing a 'one sizefits all solution' that is a bad fit for companies across the Member States." 

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