Readers of this column could be forgiven for being tempted to skip reading over July and August: after all, isn't this when Brussels shuts down completely for the summer break?
While Brussels certainly does depopulate at this time, the tendency for the European Commission to launch extensive consultation exercises before the break leads to a busy summer for many EU and regulatory specialists.
One example is the EC green paper on corporate governance in financial institutions and remuneration policies, published in June, which launches a major public consultation set to close on 1 September. The central theme of the paper is improving risk management, a topic that has commanded considerable attention in EU quarters in recent months. It addresses a number of areas, including the role of shareholders, boards, directors, conflicts of interest and corporate governance principles. The EC also notes that it will launch a broader review on corporate governance in listed companies.
The green paper also includes a section on the role of external auditors. Drawing attention to the fact that audit firms are remunerated by the companies that mandate them to audit their accounts, the green paper asks whether there is appropriate enforcement of the requirement that auditors report facts that could have serious effects in financial institutions.
Among the other key areas addressed regarding audit is the possibility of extending the reporting scheme by which external auditors alert the board of directors and supervisory authorities of any substantial risks they discover in the performance of their duties. Furthermore, a strengthening of cooperation between external auditors and the supervisory authorities is raised, with the aim of increasing knowledge of the financial sector as a whole.
Finally, the paper raises questions concerning the role that external auditors could play more broadly with regard to risk-related information in financial institutions, in order to improve investor confidence.
In order to assist the ICAEW's engagement with key stakeholders and to help inform our response, the European regional office, in conjunction with the City of London, has organised an event in Brussels with the head of the EC's department dealing with the consultation.
Pablo Portugal is the ICAEW's EU regulatory affairs manager. See the ICAEW response to the consultation.