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Us style corporate governance plan for europe Original Source Link: (May no longer be active)
http://search.ft.com/search/article.html?id=040315000915&query=corporate+regulation&vsc_appId=totalSearch&state=Formhttp://search.ft.com/search/article.html?id=040315000915&query=corporate+regulation&vsc_appId=totalSearch&state=Form
FRONT PAGE - FIRST SECTION: US-style governance plan for Europe
By Daniel Dombey in Brussels and Adrian Michaels in New York
Financial Times; Mar 15, 2004
The European Commission will tomorrow unveil plans to improve corporate governance with auditing proposals mirroring the Sarbanes-Oxley Act in the US.
If EU member states and the European parliament agree, the proposal - part of a long-running auditing and corporate governance reform plan - will enforce international audit standards, create a registration regime and a regulatory body.
After the Enron and WorldCom scandals, the Sarbanes-Oxley Act introduced a system where every auditor of a company listed in the US has to register with the Public Company Accounting Oversight Board. Top executives have to certify the "appropriateness" of financial statements, while penalties for fraud have been increased.
Under the EU's system, the European Commission cannot legislate in the area of criminal law.
But the new proposals would establish US-style oversight boards in each of the EU member states, as well as an EU-wide audit regulatory committee in charge of detailed measures in the new legislation.
In a parallel move to the Sarbanes-Oxley rules that sparked off a transatlantic dispute, non-EU auditors of listed companies would also have to register in the EU, a move some auditors fear would burden them with too much regulation.
The EU initially resisted the "extraterritorial" US demands for the EU auditors to register with the PCAOB, but controversy over the issue has lessened in recent months as the two sides have worked on a timetable for implementation and compromise.
Last week, the board formally extended by three months to mid-July the date when its oversight of non-US auditors begins.
The EU proposals would require the introduction of international auditing standards throughout the EU. The EU has already agreed to make international accounting standards obligatory for listed companies from next year, although controversy has raged over standards for derivatives.
The legislation would also give EU member states the choice over rules on compulsory auditor rotation.
One option would be to demand the rotation of the lead audit partner on an account every five years; the other would be to demand the rotation of the whole audit firm every seven years.
The proposals would force audited companies to set up an audit committee with independent members to oversee the audit process, and would require a company to explain itself to national authorities whenever it dismissed an auditor.
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