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Eighth Council Directive - Qualifications of persons responsible for carrying out the statutory audits of accounting documents (84/253/EEC)

The objective of this directive was to complete the series of directives concerning company accounts, defining the qualifications of persons responsible for carrying out the statutory audits of the accounting documents required by the fourth and seventh directives.

Persons responsible for carrying out audits of accounting documents may, depending on the law of each Member State, be natural or legal persons or other types of company, firm or partnership. The Directive applies to persons responsible for carrying out:

  • statutory audits of the annual accounts of companies and firms and verifying that the annual reports are consistent with those annual accounts in so far as such audits and such verification are required by Community law;
  • statutory audits of the consolidated accounts of bodies of undertakings and verifying that the consolidated annual reports are consistent with those consolidated accounts in so far as such audits and such verification are required by Community law.

Persons responsible for carrying out audits of accounting documents must be of good repute and may not engage in any activity incompatible with the auditing of such documents. A natural person may be approved to carry out statutory audits of accounting documents only after:

  • having attained university entrance level;
  • completing a course of theoretical instruction;
  • undergoing practical training; and
  • passing an examination of professional competence or university final examination organised or recognised by the state.

Member States may nevertheless approve persons who do not satisfy some of the above conditions if those persons can show either:

  • that they have, for 15 years, engaged in professional activities which have enabled them to acquire sufficient experience in the fields of finance, law and accountancy and have passed the examination of professional competence; or
  • that they have, for seven years, engaged in professional activities in those fields and have, in addition, undergone practical training and passed the examination of professional competence.

Member States must ensure that approved persons are liable to appropriate sanctions if they do not carry out audits honestly and independently.

In March 2004 the European Commission proposed a new Directive on statutory audit in the EU. [1] The objectives of the proposed directives are to ensure that investors and other interested parties can rely fully on the accuracy of audited accounts and to enhance the EU’s protection against the type of scandals that recently occurred in companies such as Parmalat and Ahold. The proposed Directive would clarify the duties of statutory auditors and set out certain ethical principles to ensure their objectivity and independence, for example where audit firms are also providing their clients with other services. It would introduce a requirement for external quality assurance, ensure robust public oversight over the audit profession and improve cooperation between regulatory authorities in the EU. It would allow for swift European regulatory responses to new developments by creating an audit regulatory committee of Member State representatives, so that detailed measures implementing the Directive could be rapidly taken or modified. The proposal also foresees the use of international standards on auditing for all statutory audits conducted in the EU and provides a basis for balanced and effective international regulatory cooperation with third-country regulators, such as the US Public Company Accounting Oversight Board (PCAOB).[2]

Legal basis

  • Art. 44 II lit.g EC (former Art. 54 III lit.g EEC)

Amendments

  • Proposal COM (2004)177

Links

[1] Proposal for a Directive of the European Parliament and of the Council of 16 March 2004 on statutory audit of annual accounts and consolidated accounts and amending Council Directives 78/660/EEC and 83/49/EEC [COM(2004) 177 final].

[2] See press release IP/04/340 of 16 March 2004: Audit of company accounts: Commission proposes Directive to combat fraud and malpractice.

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