Mr. Pat Houlihan:

The prohibition on non-audit services and the limitation of audit-related services is an area where the Commission is striving for independence and competition. Reference is made to the implementation of international accounting standards at member state level rather than EU level - these are accounting standards drawn up by an independent body. In the former directive, there was a provision which provided for the adoption of these standards at EU level and the proposal in the current articulation of the directive is that member states would adopt them themselves. People feel it is better from the point of view of homogeneity of application that they are adopted at central EU level, which is one of the issues.

On the content of the audit report, some feel it is too detailed. Paradoxically, a specific comment made by delegations is that the audit report is being limited to four pages or 10,000 characters, which seems a bit arbitrary. For example, if one is in the middle of saying something important, the guillotine comes down and one is obliged to stop at that point, and many member states are unhappy with this.

I described earlier some aspects of the role of the European Securities and Markets Authority, ESMA. In addition to facilitation and co-operation with the national authorities in terms of investigations and so on, this body is intended also to advise, give guidelines and issue standards in the audit area generally. However, the details are not clear as to how exactly this will work in practice and member states are unhappy and need more clarity. Another concern is that this body is essentially operating in the financial markets area. Up to now, the audit system operated in its own silo and a body in Brussels, called EGAOB, looked after its activities. Now, it is proposed to remove that link, to link in the audit aspect from the regulation in particular and to give the remit to this group, ESMA. However, only three member states have audit entities that are linked in and affiliated to ESMA so there is an issue in terms of what ESMA is supposed to be doing, how it will reach out and what link can be created between ESMA and the audit fraternity in all of the member states.

With regard to current proposals, consideration has been ongoing at the EU Council level for practically a year now. It is a slow process and has gone along fairly sedately so far. While the current Cypriot Presidency has the ambition to perhaps achieve a general approach on the Council side, we feel it probably will not achieve that. It will certainly come over into Ireland's Presidency and it is just a question of how many of the parts will come over to us to be dealt with - quite a number, I suspect. The proposals are being considered by two committees of the European Parliament - JURI, which deals with justice issues, and ECON, which is our departmental equivalent in the Parliament. They are progressing it but, again, it is uncertain as to when their deliberations will be finalised. One of the dates that has been suggested is 27 February of next year, so that pitches it a good distance out in terms of the Parliament coming to some finality on it.

It is very hard to forecast how this will play out but the indications are that Cyprus may just move it along to a particular point and then hand it over to Ireland to try to achieve a general approach, which is the agreement of the Council component in the "trilogue". For its part, the Parliament will then attempt to get its consensus on it, and the two parties will then lock horns, as it were, and attempt to come to a mutual agreement that will result in adoption. It is very difficult to say how long that process will take. The one thing I would predict with a fair degree of certainty is that Ireland will be intrinsically and fundamentally involved in carrying the process along in the new year.