Abstract
External auditors, both in the private and in the public sector, provide information to citizens and other stakeholders. The quality of this information – their auditing products – relies on ‘standards’. Audits are governed by accounting standards that largely concern ‘best practices’ designed by private accountants’ associations. This raises the question of how these standards fit into the regulatory framework in which an external public auditor operates, for example administrative law. So far, little research has been published on the role of standards setting out the principles underlying the European Court of Auditors’ (ECA) approach to audits and the procedures to be employed. By describing the structure of these standards and comparing them against the EU legal framework, we argue that the ECA, which is based on constitutional law and EU law, mainly follows the private-sector financial auditing standards. Private standards are designed outside EU law: How can auditing standards determined by the private sector be better aligned with administrative law to reflect the realities of public-sector compliance auditing in the framework of the ECA? For issues more exclusively covered by public-sector auditors, such as performance audits, public-sector auditors have developed standards and guidelines themselves. This paper aims to enhance our understanding of the institutional complementarity between global private regulation (i.e. accounting and auditing standards) and public regimes (such as general principles of good administration).
Highlights
Global regulation increasingly relies on alternatives of international legislation
The European Commission introduced accrual-based accounting in 200546 and in the introduction of the Commission’s guide to the new EU financial reporting system, the President of the European Federation of Accountants said: ‘The European Federation of Accountants fully recommends the use of accrual-based accounting by governments and public sector entities, (...).’[47]. The International Public Sector Accounting Standards Board (IPSASB) develops International Public Sector Accounting Standards (IPSAS)
We described how decisions on standards are made and how they may develop from informal law into formal law
Summary
Global regulation increasingly relies on alternatives of international legislation. Whether through various guidelines, standards, or declarations produced by organized transnational networks that involve public, private, or hybrid actors, the growing informality of international law making has been a recurring subject of legal analysis. Financial and compliance audits of the European Court of Auditors (ECA) are an example of the informality of international law making because they are governed by standards that concern the different aspects of the professionalism of auditors and their audits. These standards are developed in the context of international private-sector networks and, outside the EU’s legal framework. This article aims to improve our understanding of the institutional complementarity between transnational private regulation and public regimes It gives an overview of the question of democratic accountability when using standards emanating from the private sector in public-sector auditing and accounting. In the European framework these could, for example, derive from the European Code of Good Administrative Behaviour and become a contribution to European administrative law.[7]
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