The EU Internal Market commission has unveiled a new potential regulations for coporations following the book-cooking ways of Italian coporation Parmalat. The multinational dairy corporation collapsed in December after several employees were arrested for fraudulent bankruptcy and criminal association.
These regulations have been inspired by Enron and other U.S. corporate scandals. They have been something that has made the EU more mindful in detection, at least that's what this EU business article says.
This is another way that business exchange is happening between the US and EU.
Brussels unveils auditing clampdown in wake of Parmalat
http://www.eubusiness.com/afp/040316132355.uif12pga
Brussels unveils auditing clampdown in wake of Parmalat
http://www.eubusiness.com/afp/040316132355.uif12pga
16 March 2004
Stung into action by the Parmalat scandal, the European Union executive on Tuesday unveiled a raft of proposals to beef up corporate auditing and stop crooks "cooking the books".
The European Commission called on EU member states to adopt the proposals quickly in a bid to prevent accounting skullduggery of the type alleged to have brought down the Italian food group.
Among the headline proposals are a requirement for EU companies to set up audit committees staffed by independent directors, and to switch their auditing partner periodically.
"Auditors are our major line of defence against crooks who want to cook the books. Parmalat was a reminder of what happens when that defence fails," EU Internal Market Commissioner Frits Bolkestein said.
"No one is naive enough to think any directive will stop accounting fraud at a stroke. But what we are proposing would inject more rigour and a stronger dose of ethics into the audit process," he said.
Parmalat collapsed in December amid allegations of spectacular fraud to rival the downfall in 2001 of US energy giant Enron, another case that has inspired the EU commission's review.
Auditors Grant Thornton were responsible for checking the Parmalat group's accounts until 1999 and were succeeded as group accountants by Deloitte and Touche, although Grant Thornton remained responsible for auditing some offshore accounts.
Parmalat was declared insolvent on December 27 after money believed to have been in offshore accounts was found to have been missing.
Under the commission proposals, EU governments would require a company to change the person responsible for doing its auditing every five years, while staying with the same accounting firm.
Or, they could require the audit firm itself to be rotated every seven years. The aim is to stop the accountancy giants building too close a relationship with the companies under audit.
The proposals also lay down guidelines to prevent conflicts of interest for an accountancy company, which currently make most of their money from management consultancy and tag auditing work on as a cheap extra.
External directors would ensure the quality of the audit work and prevent untoward pressure being brought to bear on the audit firm by the company's board.
And the commission proposed to enshrine international cooperation with other corporate regulators, notably with the US Public Company Accounting Oversight Board (PCAOB).
That is recognition of the opaque financial structures favoured by some companies which make it harder for regulators and auditors to detect cross-border wrongdoing.
The commission said it hoped the European Parliament and EU member states would adopt the proposals by mid-2005, underlining the issue should be a priority for the bloc.