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Surprisingly, the vast majority of European companies (around 98. 7%) are today exempted from statutory audit, covering almost half of all employees in Europe. It is also interesting to note that approximately 1.4 million audits are performed each year while the EU mandates only 0.3 million and that the audit exemption threshold varies according to member states: some, such as Belgium and Germany, keep it close to the €8.8 million EU threshold, while others – such as Greece, Poland or Spain – keep it significantly lower.

However, at a time when governments are looking to the private sector to lead the economies of Europe out of recession and into full recovery, auditing and accounting contributions

 to the achievement of business confidence – in instilling financial discipline and ensuring better corporate governance – should not be treated lightly, even at the small entities level.

The value of audit needs to be considered in the context of a wider societal approach to checks and balances which provide assurance to all stakeholders and drive confidence in markets. In the light of this, the EU is currently

preparing the overhaul of the 4th and 7th Accounting Directives – to be unveiled end 2010-early 2011 – which should encompass a part on audit exemption thresholds; and Commissioner Barnier has announced two forthcoming EC green papers, respectively on corporate governance (to be published end of May) and on the role of audit due in September.

The issue was recently discussed during an event organised in Brussels by

ACCA (the Association of Chartered Accountants) about the role of audit and how it can be enhanced to better meet stakeholders’ needs, following the publication of ACCA’s study on Restating the Value of Audit. The outcome of the debate showed that if the benefit of incremental approaches to gradually raising the threshold needs to be recognised, this should be done at individual member state’s level, and not at EU level. In addition, any increase should be accompanied by an evidence-based impact assessment.
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