McCreevy Asks PCAOB to Establish Roadmap with European Commission

EU Internal Market Commissioner Charlie McCreevy has asked the PCAOB to develop a roadmap towards future cooperation between US and EU audit oversight bodies. This has been done in the accounting field, he noted, and should also be done for auditing. The starting point for cooperation between the PCAOB and European Union should be the home country principle, he said, adding that regulatory duplication must be avoided. In remarks at the recent European Federation of Accountants conference, he indicated that the Commission will launch a consultation next year on how to deal with non-EU auditors. Similarly, a consultation might be launched on what to do about the adoption of the IAASB’s international auditing standards.

Regarding auditor liability, the commissioner mentioned that there is an increasing trend toward litigation against auditors, a shortage of insurance, and a real danger that the Big Four auditing firms could become the Big Three. These issues have to be dealt with, he emphasized, since they are not going away. The Commission is currently preparing a report on these issues.

On the subject of IFRS, the commissioner noted that their implementation has been a huge challenge for both preparers and auditors of financial statements. But he added that the investment was worth it since the benefit of IFRS outweighs the cost. That said, IFRS must develop more consistency and coherence, in his view. For example, financial stability and transparency will not be helped if there are big differences in fair value reporting across the EU.