The 8th EU Directive, also known as the audit directive or Euro SOX, regulates the auditing of financial statements in the European Union (EU). Its aim is to ensure that investors and other interested parties can rely fully on the accuracy of audited financial statements, thereby helping to prevent corporate scandals in the EU. Its similarity to the Sarbanes-Oxley Act (SOX) in the US explains why the directive is often referred to as Euro SOX. EU member states were required to translate it into national law by June 29, 2008.
The 8th EU Directive sets out the duties of auditors and defines certain professional principles to ensure their impartiality and independence. It calls for external quality control, robust public scrutiny of the auditing profession, and improved cooperation between the responsible EU entities. In addition, international accounting standards must be applied to all audits conducted within the EU, thus laying the foundation for balanced, effective international cooperation with regulatory authorities of non-EU countries, such as the US-based Public Company Accounting Oversight Board (PCAOB).
Where public interest entities are concerned, only article 41 (para. 2) of the directive is directly relevant, under which the audit committee is obliged to:
“(a) monitor the financial reporting process;
(b) monitor the effectiveness of the internal control system (ICS), internal audit system where applicable, and risk management system;
(c) monitor the statutory audit of the annual and consolidated accounts.”
The Directive requires the use of international accounting standards (IAS, IFRS, SIC/IFRIC). There is no prescribed procedure similar to that defined in section 404 of the Sarbanes-Oxley Act.
In Germany, the directive was translated into law mainly via the German Accounting Law Modernization Act (BilMoG), which came into force on May 29, 2009. In Austria, the translation of the directive into national law (the Austrian Corporate Law Amendment Act (URÄG)) took effect in June 2008.
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