Euro MPs have backed a proposal aimed at guaranteeing the independence of auditors against the management of major listed companies in a bid to prevent further Parmalat and Ahold scandals.
Voting in Strasbourg on 28 September MEPs however rejected a part of the proposal that would have forced companies to set up an auditing committee in charge of overseeing the work performed by accountants. They also ditched a proposal to rotate accounting firms at least every seven years, and replaced it with a requirement to rotate the key auditors only.
According to Bert Doorn MEP, who steered the report through Parliament, the “rules on corporate governance must be left to the member states. The compromise gives each member state the possibility to determine the manner in which firms are to regulate and supervise their own version of audit committee,” Doorn said.
The reform is part of the update of the so-called ‘8th Company Law Directive on statutory audit’ which the Commission tabled in 2003 in a bid to avoid further auditing scandals such as that which hit Parmalat and Ahold in Europe and Enron in the US.
The directive is now due to be rubber stamped by EU finance ministers at a meeting scheduled in November.