Status report on auditing in the European Community;

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Status Report on Auditing in the European Community* Richard L. Kramer
Arthur Andersen & Co., Brussels
My comments will be principally directed towards practice within the Euro­pean
Economic Community (EEC). There are, of course, European countries who are not members of the EEC, but the nine member states of the EEC include Europe's largest economic entities, and the major developments in the accounting scene are taking place within the EEC. That scene is, however, one of deep contrasts, so that endeavoring to comment on any aspect of accounting or auditing within the EEC presents a considerable challenge.
The EEC encompasses the countries of Belgium, Denmark, France, Ireland, Italy, Luxembourg, The Netherlands, United Kingdom, and West Germany. The nine member states have a population of approximately 255 million and a gross national product of approximately $1,000 billion (the United States equiva­lents
being approximately 211 million and $1,400 billion).
Historical Developments
A little history is helpful to put our topic in perspective. Considerable differ­ences
in accounting philosophies and practices have always existed among the original six member states. The admission in 1973 of Great Britain and Ireland (who share a substantially common approach) and of Denmark brought yet further and deeper diversities. The expanded EEC then had to resolve not only the differences already present in Continental practices but also to accommodate the very different philosophies and practices held by Great Britain and Ireland.
The result was an encounter which, sparing a blow-by-blow description, has fortunately moved the accounting harmonization process quite clearly in the direction of U.S. practices. This resulted not only from strong recognition of British-Irish practices but also because several member states have taken advan­tage
of the time delay to make needed changes in their own professions and accounting practices. This encouraging progress should not, however, lead us to underestimate the magnitude of the harmonization task itself nor the time con­suming
nature inherent in the process of getting nine sovereign countries to first
* Author's note: For purposes of presentation at this symposium, comparison of the EEC
generally was made to U.S. accounting and auditing practices. Such a comparison suffers on
two accounts. First, European practices are so diverse that country-by-country analyses and
comparisons are really needed to do justice to the subject. Michael Lafferty's recent book
Accounting in Europe (Woodhead Faulkner Ltd., 1975), is highly recommended for the
interested reader. Second, a more correct, but time-consuming and overly ambitious, approach
would have been to compare European and U.S. practices to an international standard. Hope­fully,
the worldwide professions, including the U.S., will move in this direction.
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