Comments by the Auditing Standards Committee of the Auditing Section of the American Accounting Association on the European Commission Green Paper on Audit Policy: Lessons from the Crisis Free

SUMMARY: On October 13, 2010, the European Commission (EC) launched a broad consultation on the role of statutory audit as well the wider environment within which audits are conducted. In the wake of the financial crisis, the EC asked whether the role of auditors can be enhanced to mitigate any new financial risk in the future. The financial crisis also highlighted certain weaknesses in the audit sector that need to be explored further. This audit‐related work is part of the EC's effort to learn from the crisis and reform the financial sector. In particular, the EC was keen to discuss whether audits provide the right information to all financial sector participants, whether there are issues concerning audit firm independence, whether there are risks linked to a concentrated market, whether supervision at a European level might be useful, and how to best meet the specific needs of small‐ and medium‐sized businesses. The deadline for responses to the consultation was December 8, 2010. The Auditing Standards Committee of the Auditing Section of the American Accounting Association provided the comments in the letter below to the EC on the European Commission Green Paper on Audit Policy: Lessons from the Crisis.