COMPANY LAW DIRECTIVE: MANDATORY AUDIT
Letter from Gerry Sutcliffe MP, Minister
for Employment Relations and Consumer Affairs, Department of Trade
and Industry to the Chairman
Further to my letter of 31 October 2005
I am writing to inform you that a first reading deal has been
achieved between the European Council and the European Parliament
to this Directive. I am attaching a copy of the text for your
information. As you know, your Committee lifted its scrutiny reserve
on this proposal by letter on 18 March 2005.
The European Commission published the proposed
8th Company Law (Audit) Directive on 16 March 2004. This proposal
dealt with the statutory audit of annual and consolidated accounts
and was a response to the Enron/Worldcom and Parmalat financial
scandals. The purpose of this proposed Directive was to increase
confidence in both the statutory audit and statutory auditors.
After lengthy and detailed discussions between
Member States, in the Council, and between the Council and the
European Parliament (led by the UK as Presidency) a number of
compromises were reached that allowed this Directive to reach
a "first reading deal" (agreement for this Directive
to be approved, without discussion, at a forthcoming Council meeting
was given by Coreper on 30 March 2006).
Although a considerable number of areas contained
in the Directive already form part of the UK approach to statutory
audit I consider that this Directive will increase confidence
in stakeholders and shareholders in the audit function.
The forthcoming Company Law Reform Bill will
include two areas where we consider that primary legislation is
necessary to implement the requirements in the Directive. These
are (a) defining "statutory audit" to include the audits
of banks and other financial institutions and insurance undertakings
and (b) making requirements for statutory auditors of traded non-Community
Companies (third country auditors).
10 April 2006
141 Correspondence with Ministers, 45th Report of
Session 2005-06, HL Paper 243, p 386. Back