ABSTRACT
In the early 21st century, a spate of spectacular accounting scandals at US companies, notablyEnronandWorldCom,but also at European companies such as Parmalat, shook up capital markets around the globe. These scandals brought the regulation of auditors to the forefront of public debate, as their essential responsibility is to verify financial information presented by a company’s management. Policy-makers on both sides of the Atlantic set out to tighten audit regulation. However, the US reform legislation – the so-called Sarbanes-Oxley Act (SOX) of 2002 – was heavily criticized in
Europe. Its extraterritorial effects were seen as an infringement of Europe’s right to regulate its own businesses. The Act required auditors of companies listed in the US to submit to oversight by a newly established independent regulator, the Public Company Accounting Oversight Board (PCAOB) – regardless of whether the companies they audit are incorporated in the US or foreign jurisdictions. Engaging in an intense dialogue with US authorities, the European Commission sought to establishmutual recognition of the auditor oversight systems in Europe and the US At the same time, the Commission was preparing an overhaul of the existing EU Directive on statutory audit. Its reform proposals were designed to bring the European regulatory regime closer to the new US model in order to increase the chances of reaching an agreement with the US Yet, so far, the transatlantic dialogue has not led to an effective solution of the conflict.
