Dialogue with the European Commission

May 2022

The European Union (EU) is devoting considerable attention to corporate reporting. In the fall of 2021, the European Commission (EC) launched a consultation on the processes that underpin reporting, including governance, auditing, and regulatory supervision. Recent corporate scandals, such as the Wirecard fraud in Germany and the Carillion and Patisserie Valerie scandals in the United Kingdom, and reports from the European Securities and Markets Authority (ESMA) suggesting that a high percentage of financial reports had material misstatements have helped propel this consultation. The EC is seeking to improve reporting so as to shore up confidence in both capital markets and the economy more generally. The consultation closed on 18 February 2022; its results could lead to significant changes to the EU framework for corporate reporting.

Meanwhile, the EC, the European Parliament, and the Council of the EU are negotiating the final version of a Corporate Sustainability Reporting Directive (CSRD), proposed by the EC in April 2021. Among its more significant proposals are the introduction of stronger sustainability reporting requirements and sustainability standards, plus a new requirement for third-party assurance of sustainability reporting.

Spearheading the EC’s efforts on both initiatives is the Directorate-General for Financial Stability, Financial Services, and Capital Markets Union (DG FISMA). On 31 March 2022, members of the European Audit Committee Leadership Network (EACLN) met virtually with several officials from FISMA: Ugo Bassi, director of financial markets; Ward Möhlmann, deputy head of the unit responsible for corporate reporting and audit; and Delia Mehedintu, policy officer. 

The EC officials spoke off the record, but EACLN members offered substantial commentary on the topics discussed. Members also provided extensive comments in premeeting conversations. This ViewPoints aggregates and summarizes audit chairs’ perspectives both before and during the meeting with the EC officials.