Directive 2006/43/EC: Statutory Audits of Annual and Consolidated Accounts1

Implementation of Directive 2006/43/EC on Statutory Audits of Annual and Consolidated Accounts (8th Company Law Directive)

Jim Bellingham
Corporate Law and Governance Directorate
Department of Trade and Industry
1 Victoria Street
London SW1H 0ET

Dear Mr Bellingham

We write in response to the above consultation paper.

The BBA is the leading UK banking and financial services trade association and acts on behalf of its members on domestic and international issues. Our 219 members are from 60 different countries and collectively provide the full range of banking and financial services. They operate some 130 million personal accounts, contribute £35bn to the economy, and together make up the world's largest international banking centre.

We support the aims of the Directive particularly the need to reinforce and harmonise the statutory audit function throughout the EU and welcome the approach the Department is taking to implementation.

We attach particular importance to the third country provisions in articles 45 to 47. We see cooperation between regulators in the EU and regulators in third countries as important for the future development of a robust and quality conscious global audit system. Such cooperation is vital if London and Europe are to remain competitive in the global market. The success of the EU and particularly the UK in attracting companies from around the world to list on their markets cannot be undone by a heavy-handed approach to regulation.

In light of this, we believe it is vital that the implementation of articles 45 to 47 is handled sensitively and at the EU level. We agree with the approach proposed by the European Commission in its recent consultation. The Commission was right to identify the potentially damaging impact a decision by individual Member State to modify registration or oversight requirements could have. It would reduce the benefit of the Directive by leading to higher costs and uncertainties. Assessments of the equivalence of third country audit oversight regimes must be based on a broad assessment and full use must be made of transitional measures.

Secondly, we wish to comment on article 41.6, the exemption of certain classes of public interest entity from the obligation to have an audit committee. We urge the Government to make use of the exemption under Article 41.6(a) to relieve subsidiaries whose parents are public interest entities with audit committees from the requirement to have their own audit committee. Requiring a subsidiary to have an audit committee when its parent believes that it is unnecessary may lead to not just the duplication of work but also confusion over the role of each committee and the risk of audit problems arising. We agree with the Government’s decision to makes use of Articles 41.6(b), (c) and (d) to exempt collective investment undertakings, issuers of asset backed-securities and credit institutions whose shares are not admitted to trading on a regulated market respectively.

In summary, we support the Department's implementation proposals and urge the Government to work with the European Commission towards the successful implementation of articles 45 to 47.

Yours sincerely,
Adam Cull