The European _and_quot;Sarbanes-Oxley_and_quot; 2412

  • It is difficult to learn the truth. Fortunately, there are persons like Frits Bolkestein.

    He was commissioner in charge of Internal Market in the EU. I remember the first time I read his article: ‘I cannot stand Switzerland cheating on Tax’ (published in the Financial Times). He was clear:

    I cannot stand cheats or free-riders. Nor can I stand those who make money from the often-lucrative custom of tax cheats

    This was not exactly the diplomatic language… I knew that I had found a person that was not hiding his thoughts.

    Frits Bolkestein was very clear about the connection between the 8th Company Law Directive of the European Union and the Sarbanes-Oxley Act.

    May 2003: Commissioner Bolkestein spoke against the proposed US oversight measures on foreign audit firms. ‘I do not accept the imposition of US standards on our firms and that is why the European Union strongly opposes registration of EU audit firms with the United States’ Public Company Accounting Oversight Board. The EU will regulate its own businesses’ he said.

    One year after that, everything was different in the European Union.

    March 2004: Speaking on 25 March at a meeting at the European Policy Center (EPC) Frits Bolkestein said:

    'I think you are probably all already aware that we have been working very hard for nearly a year with our counterparts from the PCAOB to work out a cooperative way of regulating audit firms which audit listed companies in both the EU and the US.

    Our objective has been to work constructively together to define procedures and rationalise work across our different jurisdictions, in order to ensure international audit is as robust and sure as it can be.

    There is no doubt that this is of vital economic importance. It is also crucial for building confidence in capital markets, for investors, for stability and for keeping the cost of capital as low as possible.

    In essence, what we have to deal with here is a problem which is the epitome of globalism. Damage to one financial market, damages the other. Financial markets today are deeply interconnected.’

    Very very interesting.
    What he said after that, was even more interesting

    He continued:

    'Once the US Congress had adopted the Sarbanes Oxley Act at remarkable speed reflecting the pressure congressmen and senators were under after the collapse of Enron, WorldCom etc., - but without consultation - we in the EU were faced with a simple choice:

    Either we could oppose tooth and nail the Sarbanes Oxley Act and add yet another fiery dispute to our difficult post-Iraq bilateral relationship.

    Or we could try to find a constructive, cooperative way forward, jointly, respecting to the maximum degree possible our different legal traditions and cultures.

    We decided on the latter.’

    This is what has happened.
    I could not wait to read more:

    'Within the EU we have taken parallel action. The Commission published its proposal for an 8th Directive aiming at regulating the EU audit profession last week, a proposal which sets out the framework for cooperation between competent authorities including with third countries.

    We are now expecting a PCAOB rule change in the near future on the procedures the PCAOB will follow with third countries.

    In substance our European approach to the regulation of the audit profession and that of the PCAOB are now quite convergent.

    For example - we agree on:

    • independent public oversight;
    • audit quality assurance;
    • more frequent rotation;
    • and that auditors must have no conflicts of interest, e.g. in supplying certain nonaudit

    So, instead of ‘opposing tooth and nail the Sarbanes Oxley Act’, European Union chose to co-operate with the United States to build confidence in capital markets.

    We will live in a flat financial world.

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