Ethics and governance in the European Financial centers

According to a study on account of the European community the international market for statutory audits of large and very large companies is highly concentrated and dominated by the Big-4 networks. The likelihood of new entrants into this market is very limited in the coming years. Additionally, under the current circumstances, middle-tier firms are unlikely to become a major alternative if a Big-4 network fails.

Big Four firms offer two main categories of services: on the one hand audit services and on the other hand advisory services. But in any case they may be auditor and advisor for the same client.

As far as money laundering is concerned, auditors are required by laws and regulations to report suspicions of money laundering.

They are clearly between the devil and the deep blue sea: on the one hand their may be fined if they do not report illegal behaviours; but on the other hand they may loose a client if they do so. In both cases they may loose money and reputation.

There may be a strong ethical problem for the body corporate in the framework of advisory services. Advisory services should only be preventive services but they should not, under any circumstances, help clients resolve the regulatory problems in a curative action regarding money laundering without reporting the illegal behaviour. Otherwise the Body Corporate would have a complicit action with the reputational consequences because it remains anyway an audit firm.

That’s the reason why an independent third party, which does not, under any circumstances, condone money laundering and unethical behaviours in general, would help clients resolve in a pragmatic way the ethical predicament and, where they are regulated by a professional body, would assist them with any disclosures they are compelled to make to the authorities and the regulator to protect the reputation of both auditors and clients



Links

Auditors' liability: Commission publishes independent study on economic impact of current rules (04/10/2006)


Responsabilité des sociétés d'audit: la Commission lance une consultation sur une réforme éventuelle des régimes de responsabilité dans l'UE (18/01/2007)

GRECO’s 32nd Plenary Meeting will be devoted to the examination of reports within the framework of the First and Second Evaluation Rounds (19-21 March) and to a Start-up Training Workshop for the launching of the Third Evaluation Round (22-23 March).

GRECO will examine for adoption the draft Joint First and Second Round Evaluation Report on Ukraine. It will also examine for adoption draft Addenda to the First Round Compliance Reports on Albania, Czech Republic, Hungary, Lithuania, the Netherlands and the “former Yugoslav Republic of Macedonia”; as well as draft Second Round Compliance Reports on Belgium, Denmark, France and Sweden.

The Start-up Training Workshop for the Third Evaluation Round on the theme of Transparency of Party Funding, which is designed for GRECO evaluators will involve a number of international experts in this area (hyperlink to agenda of workshop). The Third Evaluation Round was launched on 1st January 2007 and the first evaluation visits are scheduled to take place in Finland, Slovakia, Slovenia and the United Kingdom in June/July 2007.

GRECO will also adopt its Seventh General Activity Report related to work carried out in 2006. This seventh edition includes a section devoted to the protection of whistleblowers.


Questionnaires relating to the Third Evaluation Round

Dr. Thomas F. Huertas, Director Wholesale Firms Division and Banking Sector Leader, FSA, was speaker in the framework of the Fourth Annual Complinet Compliance Conference a few weeks ago.
His topic was : Counting on compliance: The implications of more principles-based regulation.
His conclusion was that Compliance continues to play a key role under more principles-based regulation. Compliance should effectively act as the conscience of the firm: make sure that people get strong signals about what is right and what is wrong, and, over time, weed out wrong-doing, and, if necessary, wrong-doers.

See speech