Monitoring Audit Firms from Outside EU

Steven Bobson, Europe & Americas Editor
March 09, 2012 /

The Professional Oversight Board has published for consultation proposals on the external monitoring of auditors of companies from outside the EU that have issued securities on the London Stock Exchange.

These proposals are designed to meet the requirements of the Statutory Audit Directive.

In general they would not apply where the audit firm is already subject to an equivalent system of regulation in its home country. The focus is on auditors from countries that the European Commission has not recognised as having an equivalent system of regulation, or as having firm plans to introduce one.

There are 301 such audit firms from 21 countries undertaking just over 40 relevant audits.

Paul George, Director of the Oversight Board said: “It is important that investors understand the degree of assurance offered by any audit inspection regime and do not place more weight on it than is justified by the assurance it delivers.

“It is certainly challenging to find a proportionate way of monitoring the quality of audit work at firms widely scattered across the world that only have one or two relevant clients and operate in countries that present obstacles to effective inspection, for example by blocking access to audit working papers.”

“Overall, we are doubtful that the regulatory work and costs required to apply the same inspection approach internationally as that applied in the UK would be justified by the benefits for investors, having regard to the value of the shares traded in London of the companies being audited.

“We have therefore proposed a range of options and would particularly welcome the views of investors on the different inspection approaches we have proposed and the value they would place on such monitoring of the relevant audit firms.”

In total there are just over 100 UK-registered third country audit firms undertaking just under 300 relevant audits.

 

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