A global convergence of auditing standards could be nearby, according to the ACCA, after the European Commission published a study comparing future EU and US standards.
The study, conducted independently by the Maastrict Accounting, Auditing and Information Management Research Center (MARC) evaluates the differences between international standards in auditing (ISAs) and those of the US Public Company Accounting Oversight Board (PCAOB).
The ISAs recently underwent a modernisation to clarify its key points, and is currently the subject of an EC public consultation on how it will be adopted in EU member states.
“This is an important study and its independence is a key factor. Comparing the US system with that proposed for Europe is a timely exercise that also holds lessons for governments, regulators and investors”, said David York, ACCA head of auditing practice.
MARC’s report concluded that there was little or no difference between the updated EU standards and those in the US, and York argues this will increasingly be the case in future as the PCAOB is proposing to change its standards on the auditor’s assessment of and response to risk to bring it in line with the ISAs risk driven, principles based approach.
York noted, however, that significant differences would remain due to Sarbanes-Oxley and the need for separate reporting by auditors on internal control over financial reporting.
“Audit quality depends on how [standards] are applied by firms and enforced by regulators. By extension, investors should be in favour of consistent global standards of audit firm governance and transparency, and consistent regimes of inspection and oversight”, he concluded.