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ABSTRACT
Taking the European audit profession as a case study, our paper explores the role of private actors in transatlantic regulatory relations and transnational regulatory harmonization more generally. In the early twenty-first century, both the US and the EU tightened the regulation of auditors. Due to its extraterritorial effects, the US reform legislation sparked a transatlantic conflict. Seeking mutual recognition of the respective auditor oversight systems, the European Commission endeavored to bring the European regulatory regime closer to the new US model. During the reforms of EU audit regulation, the profession, together with member states, successfully resisted a far-reaching convergence of European regulation to the US model of independent oversight, thus impeding the resolution of the transatlantic conflict. We argue that the profession's defense of the traditional model of European audit regulation results from two intertwined aspects: the profession's interest in keeping a share of power in the regulatory regime and its institutional embeddedness in distinct national and regional regulatory and market structures. In concluding, we discuss the implications of our findings for the relevant international and comparative political economy literature.
ACKNOWLEDGEMENTS
We would like to thank IanCanaris and Andreas Storz for valuable research assistance. Special thanks go to Thomas Eimer, Susanne Lütz and the three anonymous reviewers for helpful comments on earlier versions of this paper.
This work was supported by the Deutsche Forschungsgemeinschaft (DFG) (LU 867/1-2).
Notes
1. Fédération des Experts Comptables Européens
2. European Contact Group
3. European Group of International Accounting Networks and Associations.
4. In this study, an audit mandate relates to the individual accounts of the audited company.
6. However, the PCAOB explicitly rejected adopting a system of mutual recognition by which the Board would accord complete deference to the home-country regulator.
7. Given the focus of this paper, the following account of the debate regarding the new Eighth Directive concentrates on the question of auditor oversight. A number of other provisions, such as appropriate safeguards for auditor independence, were also highly controversial during the legislative process (cf. FEE 2004 a).