LONDON, Oct 13 (Reuters) - The financial crisis showed that auditors who check the accounts of companies fell short in their work in some cases and new laws may be needed, the European Union's executive said on Wednesday. "The crisis highlighted failings in the audit sector," EU Internal Market Commissioner Michel Barnier said in a statement.
"These need to be explored and we need to see what improvements can be made. I believe it is important to approach this discussion in a frank and open manner. No subject should be taboo."
Regulators across the world are turning their attention to whether auditors were proactive enough in questioning what was going on at banks before the crisis unfolded.
Britain's Financial Reporting Council regulator is already probing how Ernst & Young audited the books of Lehman Brothers, the U.S. bank whose failure in 2008 brought the world's financial system to its knees. [ID:nLDE6931T3]
The European Commission, which has powers to propose draft laws, said several areas needed exploring:
-- whether auditors are independent enough to question company practices;
-- whether investors are placing too much reliance on audits;
-- in a sector dominated by the "big four" -- PWC, Deloitte, KPMG and Ernst & Young -- is there a risk to the broader financial system if one of them failed;
-- is national supervision effective;
-- whether it should be made easier for auditors to operate across borders.
Britain's Financial Services Authority and Financial Reporting Council published a consultation paper in June saying auditors should question companies more and there may be a need for new rules forcing them to "blow the whistle" on suspect practices. [ID:nLDE65S183]