State Board Report

January 2012

The International Federation of Accountants (IFAC) has offered some support and some objections to the European Commission’s proposed legislation announced on November 30 (see sbr 12/11). IFAC maintains that a number of the proposals in the legislation were not widely supported by the responses received to the EC’s “Green Paper on Audit Policy: Lessons from the Crisis,” released in December 2010.

IFAC, which is comprised of 167 member and associate accountancy bodies in 127 countries, disagreed with the EC’s November 2011 proposed legislation in the areas of: mandatory firm rotation after a fixed period, prohibition of audit firms providing non-audit services, restricting the role of audit oversight by professional accountancy organizations, and requiring firms of a certain size to provide only audit services.

It did agree with the EC’s proposed legislation as to: the need to review and enhance the auditor’s report, compliance with International Standards on Audit, strengthening of audit committees, enhancing the dialogue between auditors and regulators, having greater transparency in auditor selection, and enabling greater cross-border mobility for auditors.

Its press release states: “IFAC is concerned that the proposals will provide significant problems for global public interest entities that require global audit services. IFAC does not believe that requiring firms of a certain size to provide only audit services will enhance global quality and service capability of the profession. It therefore urges that the Parliament consider the implications legislative changes will have for non-European Union states and the global market for audits of multinational companies.”

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