A senior European Union official called for tougher accounting rules Tuesday, and said the Parmalat scandal in Italy may prove to be even worse than the collapse of Enron in the U.S.
EU Internal Market Commissioner Frits Bolkestein recalled that after the Enron scandal erupted in the U.S., the commission stated that Europe must not be complacent and that scandals of a similar scale could also happen in Europe.
"Fortunately, the commission already set in motion in May 2003 action plans to improve both auditing and corporate governance in Europe," he said. "We are therefore able to take account of possible lessons to be learned from what may have gone wrong in the Parmalat case to adjust and improve the initiatives on auditing and corporate governance that were already in motion."
Bolkestein told a news conference that proposals to strengthen auditing rules will be presented in March to prevent a repeat of the Parmalat scandal. He warned, however, that "hasty and ill-conceived" legislation could add to regulatory problems, Reuters reported.
The rules being considered by the commission include: tightening the oversight of auditors at the national level; establishing rules on audit quality assurance; requiring compliance with rules on independence and ethics; implementing tougher penalties for malpractice; and improving international cooperation among regulators.
Bolkestein said, "This last point is essential to prevent — and detect and sanction where they nonetheless occur — multi-faceted fraudulent operations covering several jurisdictions, a key feature of the Parmalat case."
Parmalat entered bankruptcy protection last month, after acknowledging that Bank of America did not hold nearly $5 billion of its funds, as the dairy company had falsely claimed.