Last week, the European Commission extended the deadline for its consultation on the adoption of International Standards on Audit (ISAs) in the European Union.
The Commission is seeking views on whether or not the EU should adopt ISAs, something the ICAEW is strongly in favour of as we believe the EU should adopt clarified ISAs at the earliest opportunity.
Within the EU, audit standards vary between jurisdictions. This makes it harder for investors to rely upon and trust the information that companies provide. If they knew that all audits across the EU were based on the highest-quality standards available, however, it would boost their confidence in financial information from EU companies and benefit the internal market as a whole.
Currently, audits are based on ISAs, or on domestic audit standards derived from ISAs, in more than 100 countries around the world. Recently, the IAASB completed its long project to make the standards easier to understand and use. From December, more than 20 of the largest audit firms, members of the Forum of Firms, plan to use these clarified ISAs.
I don’t doubt that adoption will be challenging for the EU. That’s why it’s important that businesses and auditors flag to the Commission and to national authorities the challenges they foresee by the new deadline of 15 October.
An effective implementation programme, particularly for smaller company audits, will necessitate a concerted effort on the part of regulators, the profession and other stakeholders. The ICAEW has considerable experience in this area as we engaged in an intensive awareness raising campaign when ISAs were originally introduced in the UK in 2005.
There are clear advantages to being at the forefront of international regulatory developments, particularly at this critical time. That’s why the time is now right for the European Union to show global leadership in the adoption of these international standards.