No C 171/30 Official  Journal  of the European  Communities 9. 7. 79 
Opinion  on the proposal  for an Eighth  Directive  pursuant  to Article  54 (3) (g) of the  EEC 
Treaty  concerning  the approval  of persons  responsible  for carrying  out  statutory  audits  of 
the annual  accounts  of limited  liability  companies 
The text  referred  to the Committee  has  been  published  in Official  Journal  of the European 
Communities  No  C 112  of 13 May  1978,  page  6. 
A. LEGAL  BASIS  FOR  THE  OPINION 
On 9 May  1978,  the  Council  referred  the abovementioned  proposal  to the  Economic  and 
Social  Committee  in accordance  with  Article  54 of the  Treaty  establishing  the  European 
Economic  Community. 
B. OPINION  OF  THE  ECONOMIC  AND  SOCIAL  COMMITTEE 
The Economic  and  Social  Committee  prepared  its opinion  on the  above  matter  at its 167th 
plenary  session,  held  in Brussels  on 4 and  5 April  1979. 
The full  text  of the opinion  is as follows: 
THE  ECONOMIC  AND  SOCIAL  COMMITTEE, 
Having  regard  to Article  54 of the  Treaty  establishing 
the European  Economic  Community, 
Having  regard  to the  request  made  by the  Council  of 
the European  Communities  on 9 May  1978  for  an 
opinion, 
Having  regard  to the decision  taken  by its Bureau  on 30 
May  1978,  instructing  the  Section  for  Industry, 
Commerce,  Crafts  and  Services  to draw  up an opinion 
and a report  on the matter, 
Having  regard  to the  opinion  issued  by the Section  for 
Industry,  Commerce,  Crafts  and  Services  at its meeting 
of 7 March  1979, 
Having  regard  to  the  report  submitted  by  the 
rapporteur,  Mr Friedrichs, 
Having  regard  to the  discussions  at its 167th  plenary 
session  held  on 4 and  5 April  1979  (meeting  of 4 April 
1979), 
HAS  ADOPTED  THE  FOLLOWING  OPINION 
unanimously: 
The Committee  endorses  the  draft  Eighth  Directive, 
subject  to the following  comments  and  qualifications: 1. General  comments 
1.1. The  Committee  considers  the  draft  Eighth 
Directive  to be  a necessary  adjunct  to the  Fourth 
Directive  on the  annual  accounts  of limited  liability 
companies  (x), the  draft  Seventh  Directive  on group 
accounts  (2) and  the  draft  Fifth  Directive  on  the 
structure  of societes  anonymes  and  the  powers  and 
obligations  of  their  organs  (3). These  instruments 
require  the  limited  liability  companies  they  cover  to 
have  their  annual  accounts  audited  by  independent, 
specially  authorized  persons.  The  draft  Eighth  Directive, 
for its part,  aligns  authorization  requirements  in the 
Member  States,  so as to ensure  that  statutory  audits  are 
effected  by  specially  qualified  auditors  (the  term 
'auditors'  is used,  in the interests  of simplicity,  to mean 
'persons  responsible  for carrying  out  statutory  audits  of 
the annual  accounts  of limited  liability  companies') 
throughout  the Community. 
1.2. The  obligation  on limited  liability  companies  to 
have  their  annual  accounts  audited  by  independent, 
qualified  persons  is a protection  for  shareholders  and 
third  parties.  The  draft  Eighth  Directive  lays  down 
minimum  requirements  as to the  independence  and 
professional  qualifications  of  auditors  of  annual 
accounts,  the  purpose  being  to ensure  equivalent 
minimum  protection  for  shareholders,  workers,  third 
(!) OJ No L 222,  14. 8. 1978. 
a OJNoC  121,2.6.  1976. 
(3) OJ No C 131,  13. 12. 1972. 
9. 7. 79 Official  Journal  of the European  Communities No C 171/31 
parties  and  the public  in all member  countries.  Having 
regard  to the  current  differences  in the  rules  and 
regulations  of the  member  countries,  the  Committee 
endorses  this  aim.  However,  implementation  of the 
Directive  should  not,  without  due  cause,  lead  to an 
easing  the requirements  in the Member  States  with  more 
stringent  authorization  standards. 
1.3. The  Committee  welcomes  the  high  level  of the 
requirements  laid  down  by Articles  4 and  5 of the draft 
Directive  with  respect  to the qualifications  of auditors. 
The Section  considers  this  to be absolutely  vital,  since 
auditors  must  have  a high  level  of theoretical  knowledge 
and practical  competence  if statutory  audits  of limited 
liability  companies  are to provide  a real  protection.  The 
Committee  therefore  accepts  the principle,  laid  down  in 
the draft  Eighth  Directive,  that  statutory  audits  may  be 
carried  out  only  by  persons  who  have  'passed  an 
examination  of professional  competence  at graduate  or 
an equivalent  level  of training'. 
1.4. A vital  element  in auditors'  qualifications  is 
independence.  The  Committee  realizes  the  difficulties 
involved  in a legal  definition  of 'independence'.  It 
nevertheless  considers  that  the  authors  of the  draft 
Eighth  Directive  were  right  to try and  lay down  criteria 
for the independence  of auditors  of annual  accounts. 
2. Specific  comments 
2.1. Article  1 
2.1.1.  The  draft  Eighth  Directive  applies  only  to 
persons  responsible  for statutory  audits  of the types  of 
company  specified  in its Article  1. At first  sight  this  is 
logical,  given  the  links  between  the  draft  Eighth 
Directive,  the Fourth  Directive  and  the  draft  Fifth  and 
Seventh  Directives.  However,  there  is a disadvantage.  If 
the Community  adopts  further  Directives  under  EEC 
Treaty  Article  58 (2),  prescribing  audits  for the annual 
accounts  of other  types  of company,  it will  be necessary 
to make  special  arrangments  for  the  authorization  of 
persons  to carry  out such  audits. 
The Committee  thinks  this  would  be too complicated.  It 
considers  that  Article  1 should  be reworded  so as to 
extend  the  scope  of the  draft  Directive  to include  the 
authorization  of persons  responsible  for  carrying  out 
statutory  audits  of the  annual  accounts  of companies 
under  subsequent  Directives. 2.2. Article  2 
2.2.1.  The  Committee  considers  that  legal  persons  and 
other  types  of professional  companies  and  associations 
should  be authorized  to carry  out statutory  audits  only 
if a number  of special  conditions  are  satisfied.  The 
Committee  therefore  welcomes  that  fact  that  the 
Commission  has  laid  down  special  conditions  in 
Article  2. However,  the  following  detailed  changes 
should  be made: 
(a) The  Committee  endorses  the  rule  that,  when  a 
professional  association  or professional  company 
has to select  persons  to audit  the annual  accounts  of 
limited  liability  company,  such  selection  may  be 
effected  solely  by  persons  who  meet  the 
requirements  of the draft  Directive  (Article  2 (2) (a), 
first indent).  However,  the phrase  'appointment  or 
removal  of auditors'  is misleading  since  it seems  to 
refer  to appointment  or removal  by the competent 
bodies  of the  company  whose  accounts  are  being 
audited.  The  clause  in question  should  be reworded 
to make  it clear  that  it refers  to the internal  selection 
procedure  of  the  professional  association  or 
company  providing  the auditor. 
(b) The  Committee  accepts  that  the  second  indent  of 
Article  2 (2) (a) is proposed  because  of the situation 
at present  existing  in a number  of Member  States. 
Thus  the  provision  in  question  is doubtless 
unavoidable.  The  present  wording  means,  however, 
that up to the  entry  into  force  of implementing 
measures,  it will  be possible  to form  professional 
companies  and  associations  in which  persons  not 
authorized  to carry  out  statutory  audits  have  a 
majority  holding.  It is only  after  the implementing 
measures  come  into  force  that  the formation  of such 
companies  and  associations  will  be prohibited  and 
persons  who  are not authorized  auditors  will  not be 
allowed  to  enlarge  their  holdings  in existing 
companies  and  associations  so as to acquire  a 
majority  of their  capital. 
The Committee  has  doubts  about  the  wisdom  of 
allowing  so much  time  to elapse  before  the  ban 
becomes  effective.  The  Committee  fears  that  the 
very announcement  of the  ban  might  stimulate  an 
undesirable  trend.  Attempts  should  be made,  in 
liaison  with  the  Member  States,  to prevent  this 
happening. 
The Committee  also  points  out  that  a majority  of 
voting  rights,  as well  as a majority  capital  holding, 
can confer  control.  The  Section  recommends  that 
the clause  be expanded  accordingly. 
(c) The  Committee  agrees  that,  in the  interests  of the 
company  whose  accounts  are  being  audited,  it is 
necessary  to  ensure  that  audit  reports  and 
No C 171/32 Official  Journal  of the European  Communities 9.7.  79 
documents  relating  thereto  do not  come  to the 
knowledge  of  unauthorized  persons,  and  that 
business  secrets  are proteceted. 
However,  statutory  auditing  by  professional 
companies  and  associations  will  be  seriously 
impeded  by the present  wording  of the third  indent 
of Article  2 (2) (a), since  it precludes  the use of such 
specialists  as  data-processing  experts  and 
statisticians.  This  cannot  be the purpose  of such  a 
protection  clause.  The  Committee  therefore 
proposes  deleting  the  phrase  'and  that  these  are 
withheld  from  the  knowledge  of  the 
abovementioned  persons'.  The  Committee  considers 
that it is quite  sufficient  if the  confidentiality  of 
audit  reports  and  related  documents  is protected. 
2.3. Article  3 
2.3.1.  As  already  stressed  in the  General  Comments, 
the Committee  considers  independence  to be  an 
essential  element  in an auditor's  qualifications.  The 
same  applies  to good  repute.  The  term  'persons  of good 
repute'  used  in this  Article  will  not  in the Committee's 
view  give  rise  to any  major  difficulties  of interpretation, 
but the  word  'independent'  could  be misconstrued  in 
such  a way  that  only  self-employed  persons  would 
qualify  for approval.  In the section  of the Explanatory 
Memorandum  dealing  with  Article  3, the Commission 
states  that  'the  role  of an auditor  can  be said  to be 
incompatible  with  any  activity  which  is of a kind  that 
may limit  his independence'.  The  Committee  therefore 
suggests  that  no reference  be made  to independent 
persons  in Article  3, and  that  the  independence  of 
auditors  be dealt  with  solely  in Article  11. 2.5. Article  4 (2) 
2.5.1.  The  Committee  points  out  that  Article  4 (2), 
read  in conjunction  with  Article  4(1)  and  Article  5 (1) 
(3) and  (4),  is unclear.  Article  4 (1)  talks  of an 
examination  of professional  competence,  while  Article  4 
(2), by referring  to Article  5, which  deals  separately 
with  the testing  of theoretical  knowledge  and  the testing 
of practical  knowledge,  gives  the impression  that  there 
are to be two  separate  tests.  The  derogation  provisions 
of Article  5 (4) strengthen  this  impression. 
2.5.2.  After  detailed  discussion,  the  Committee 
considers  that  there  should  be one  examination  of 
professional  competence,  which  would  simultaneously 
cover  both  theoretical  and  practical  knowledge.  The 
Committee  urges  the  Commission  to clarify  Articles  4 
and 5 on these  lines.  However,  as the  Committee 
attaches  the  same  importance  to practical  as  to 
theoretical  knowledge,  it feels  in principle  that 
candidates  should  not  normally  be allowed  to sit this 
examination  till they  have  successfully  completed  the 
practical  training  mentioned  in Article  5 (3).  The 
Committee  refers  to its comments  on Article  5 (4). 
2.6. Article  5 (1) 
2.6.1.  The  Committee  considers  the list of subjects  to 
be necessary  in order  to guarantee  as far as possible  that 
the tests  will  be equivalent.  For  this  reason,  too,  the 
Committee  proposes  that  the  detailed  statement  of 
subjects  contained  in the Explanatory  Memorandum  be 
reproduced  in a non-binding  Appendix  to the  draft 
Directive.  This  Appendix  would  provide  the  Member 
States  with  guidance,  and  thus  further  help  to ensure  the 
equivalence  of tests. 
2.4. Article  4 (1) 
2.4.1.  In the  Committee's  view,  a high  level  of 
professional  competence  is needed  to carry  out the tasks 
of an auditor.  The  Committee  points  out  that  the 
requirements  laid  down  in this  and  the  following 
Articles  are  minimum  ones  and  that  some  Member 
States  have  more  stringent  requirements.  It also  notes 
that the  methods  of training  differ  greatly  from  one 
Member  State  to another. 2.6.2.  In addition,  the  Committee  recommends 
establishing  a committee  which  would  propose  changes 
in the  list of examination  subjects,  in the  light  of the 
changing  requirements  of  auditing  practice.  The 
relevant  professional  bodies  should  be represented  on 
this committee. 
After  giving  due  consideration  to all the various  aspects, 
the Committee  comes  to the  conclusion  that,  viewed 
overall,  the provisions  of this  paragraph  are reasonable. 
They  guarantee  a sufficient  level  of competence  on the 
part of those  entrusted  with  statutory  audits. 2.7. Article  5 (2) 
2.7.1.  The  Committee  takes  the  view  that  the 
university  degree  or equivalent  qualification  referred  to 
must  be of a standard  equivalent  to that  of the theoreti-
cal test  required  under  Articles  4 and  5. 
9. 7. 79 Official  Journal  of the European  Communities No C 171/33 
2.8. Article  5 (4) 
2.8.1.  As  stated  under  2.5.2,  the Committee  considers 
that,  in principle,  the  practical  training  mentioned  in 
Article  5 (3) should  be completed  before  admission  to 
the examination  of professional  competence.  However, 
in some  Member  States  practical  skills  are  inculcated 
during  the period  of theoretical  training,  so that  it might 
be possible  to pass  the  examination  of professional 
competence  before  completion  of the practical  training 
stipulated  in Article  5 (3).  The  Committee  cannot  shut 
its eyes  to this  situation,  but  nevertheless  feels  that 
nobody  should  become  an approved  auditor  till he has 
acquired  adequate  practical  experience  which  can  only 
be provided  by the training  mentioned  in Article  5 (3). 
In this  spirit,  the  Committee  accepts  the  derogation 
made  in Article  5 (4),  while  stressing  that  approval  must 
not be granted  till after  successful  completion  of the 
practical  training  mentioned  in Article  5 (3). 
2.8.2.  The  Committee  points  out  that  the  practical 
training  referred  to in Article  5 (4)  is the  practical 
training  specified  in Article  5 (3).  It is therefore  illogical 
to state  that  only  'part'  of such  practical  training  may 
take place  after  the  examination  of  professional 
competence.  The  Committee  asks  the  Commission  to 
consider  this  point. 2.12.  Article  10 
2.12.1.  The  Committee  notes  that  it is not a question 
here of rules  binding  on the Member  States.  The  second 
sentence  of subparagraph  (a) of paragraph  1, however, 
obliges  the  Member  States  to recognize  as equivalent 
qualifications  obtained  in another  Member  State.  The 
Committee  considers  that  this  provision  goes  too  far, 
bearing  in mind  that  the  draft  Directive  lays  down 
minimum  requirements  and,  in particular,  given  the 
exceptions  provided  for  in Article  7. This  provision 
could  possibly  induce  some  Member  States  to pursue  a 
restrictive  policy  on the approval  of auditors  from  other 
Member  States.  The  Committee  therefore  proposes 
that the provision  be reviewed.  The  sentence  in question 
should  be  deleted,  or  amended  to  specify  that 
qualifications  obtained  in another  Member  State  are to 
be recognized  as equivalent  if the approval  granted  in 
that other  Member  State  was  granted  after  an 
examination  of professional  competence  pursuant  to 
Article  4. The  Committee  agrees  that  it should  also  be 
necessary  to demonstrate  adequate  legal  knowledge,  as 
stipulated  in Article  10 (1) (b). 
2.12.2.  The  Committee  would  also  suggest  that  the 
reference  to Article  11 be deleted  here  as well. 
2.9. Article  6 
2.9.1.  The  Committee  proposes  that  the  word 
'supervised'  in paragraph  1, subparagraph  (b),  be 
deleted.  It is already  clear  from  the reference  to Article  5 
(3) or (4) what  practical  training  is meant. 
2.10.  Article  7 
2.10.1.  The  Committee  appreciates  that  when  the 
Directive  is being  applied  exceptions  will  be necessary, 
given  the  inevitable  difficulties  which  will  arise  in the 
change-over  from  national  to Community  rules.  As a 
matter  of principle  it would,  however,  urge  that  the 
exceptions  be confined  to the  absolutely  unavoidable, 
and it refers  in this  connection  to Article  9 of the draft 
Directive,  which  it thinks  should  be strictly  applied.  The 
Committee  also  considers  that  the  reference  made  in 
Article  7 to Article  11 should  be deleted,  since  Article 
11 refers  to rules  for the appointment  of auditors  and 
not those  for their  approval. 
2.11.  Article  8 
2.11.1.  Here,  too,  the Committee  suggests  deletion  of 
the reference  to Article  11. 2.13.  Article  11 
2.13.1.  The  Committee  is pleased  that  this  Article 
gives  a number  of objective  criteria  calculated  to ensure 
that an auditor  entrusted  with  a statutory  audit  will  be 
independent  of the company  whose  accounts  are to be 
audited.  The  Committee  has already  pointed  to the need 
for the  independence  of auditors  to be dealt  with 
entirely  in Article  11. This  Article  should  accordingly  be 
expanded  by rewording  paragraph  1 to read: 
'Only  an approved  person  whose  independence  is 
sufficiently  guaranteed  in relation  to ... may  audit 
the accounts  of that  company.  He may  not  pursue 
other  activities  liable  to  jeopardize  his 
independence'. 
As regards  paragraph  3, the  Committee  considers  the 
limit  of 10%  of turnover  to be acceptable,  although  it 
would  point  out  that  the  disciplinary  authorities  must 
apply  other  yardsticks,  particularly  in the  case  of new 
entrants  to the profession  and  also  perhaps  ending  their 
professional  activity.  However,  the Commission  should 
spell  out what  it means  by 'turnover'. 
The Committee  also  draws  attention  to the  close 
connection  between  Article  11  of the  draft  Eighth 
No C 171/34 Official  Journal  of the European  Communities 9. 7. 79 
Directive  and  Articles  53  to 57  of the  draft  Fifth 
Directive  on  the  structure  of societes  anonymes  (1), 
which  give  detailed  criteria  for  the  independence  of 
auditors.  In view  of this  connection  the  Committee considers  that  either  the two  Draft  Directives  should  be 
adopted  together  or the  provisions  of the  Draft  Fifth 
Directive  should  be incorporated  in the  Draft  Eighth 
Directive. 
Done  at Brussels,  4 April  1979. 
The Chairman 
of the Economic  and  Social  Committee 
Fabrizia  BADUEL  GLORIOSO 
OJ No C 131,  13. 12. 1972. 
Opinion  on the problems  currently  facing  Community  shipping  policy,  particularly  maritime 
safety,  the  growing  importance  of the  new  shipping  nations,  the  development  of flags  of 
convenience  and  the discrimination  against  certain  flags 
The opinion  of the Committee  is not  based  on any  text. 
A. LEGAL  BASIS  FOR  THE  OPINION 
At its 155th  plenary  session  held  on 1 and  2 February  1978,  the  Committee,  acting  on a 
proposal  from  the Bureau,  decided  to deliver  an opinion  on the abovementioned  subject  on 
its own  initiative. 
B. OPINION  OF  THE  ECONOMIC  AND  SOCIAL  COMMITTEE 
The Economic  and  Social  Committee  prepared  its opinion  on the above  matter  at its 167th 
plenary  session,  held  in Brussels  on 4 and  5 April  1979. 
The full  text  of the opinion  is as follows: 
THE  ECONOMIC  AND  SOCIAL  COMMITTEE, 
Having  regard  to Articles  15 and  20 (fourth  paragraph) 
of the rules  of Procedure, 
Having  regard  to the  decision  of the  Economic  and 
Social  Committee  at its plenary  session  of 1 and  2 
February  1978,  following  a proposal  from  its Bureau,  to 
deliver  an opinion  in the abovementioned  subject, Having  regard  to the  overall  report  submitted  by the 
rapporteur,  Mr  Rouzier,  and  the  individual  reports 
submitted  by the  co-rapporteurs,  Mr  Hennig  (1), Mr 
Kenna  (2) and  Mr Massabieaux  (3), 
Having  regard  to its discussions  at its 167th  plenary 
session,  held  on 4 and  5 April  1979  (meeting  of 4 April 
1979), 
Whereas  in recent  decades  the  volume  of world  trade, 
has practically  doubled,  increasing  by 86 7 % between 
Having  regard  to the  opinion  issued  by the  Section  for 
Transport  and  Communications  at its 125th  meeting, 
held  on 14 March  1979, (2) 
(3) Flags  of Convenience. 
Flag  Discrimination-
Role  of the New  Shipping  Nations.