Important Recent Developments Within France's Accounting Profession Including the Nation's Independent Audit Function

1- Research relevant databases to identify important recent developments within France's accounting profession, including the nation's independent audit function. Summarize these developments in a bullet format

Shortly after the U.S. passed the Sabaranes-Oxley statue the French business community commissioned a study to see what was necessary in France to strengthen financial reporting, internal controls and corporate governance. Societe Generale's very own Daniel Bouton was chosen to chair the commissioned committee. This is very ironic indeed as he deemed all this unnecessary and overkill. He would regret it later on. A lengthy report nicknamed the Bouton report came out of this study. There was a list of proposals that were in the report that was adopted in French Parliament as of 2003 when France modified the countries federal securities laws that as a whole are called French Commercial Code ( Code de Commerce). The following information is a few summarizations I found in my research which states the following developments:

 Be approved in any member state. This change is designed to enhance compatibility with internal market rules and allow for more fully integrated audit firms.

 Adhere to continuous education requirements. Statutory auditors should have knowledge of specific legislation of member states--company, fiscal, and social security law--as well as international accounting and audit standards.

 Show evidence of approval through registration in a public electronic register. Registration will enable interested parties to ascertain whether a statutory audit firm (or auditor) has been approved, its location, and how it is organized.

 Be subject to effective public oversight. For public interest entities, oversight of auditors should be carried out exclusively by non-practitioners who are knowledgeable about accounting and auditing

 Be subject to robust professional ethics. The auditors and firms will be subject to the code of ethics adopted by the Ethics Committee of the International Federation of Accountants.

 Be independent from the audited entity. Auditors or audit firms must not be involved in management decisions of the audited entity and must not accept any non-audit engagement that would compromise their independence. Auditors must document all significant threats to their independence.

 Adhere to the IAASB'S International Standards on Auditing. States may only impose additional audit procedures if they follow from specific requirements related to the audit's scope.

 Disclose a governance statement, a description of the internal quality control system, and a statement on the effectiveness of the audit firm's administrative function. The report must include the date of the last quality assurance review, policies on continuous education requirements, and a breakdown of fees.

 Be aware of a new audit regulatory committee composed of member states and chaired by a representative of the European Commission (EC). The committee will

assist the EC in establishing the implementation measures of the directive.

 Be aware that third-country auditors who issue audit reports in relation to securities traded in the EU need to be registered in the EU. The quality of audits within the EU should not be undermined by possible poor audit quality from third-country auditors who issue audit reports in relation to securities traded in the EU.

 Cooperate with the mandated audit committee in the audit and financial reporting process. Key issues may include significant changes in accounting policies, risks, and exposures facing the company, material audit adjustments and uncertainties, disagreements with management, expected modifications to the auditor's report, management fraud, and material weaknesses in internal controls related to the financial reporting process. This is just to name a few reforms and its very compatible to Sabranes-Oxley Act of 2002. The article I cited for this research is "The European Union prepares to issue its response to corporate malfeasance" by Louis Braiotta, Jr.

2- Societe Generale maintained that because Jerome Kerviel's "unauthorized activities" were initiated in 2007, the 6.4 billion euro loss that he incurred in January 2008 should be recorded in 2007. Do you agree with that reasoning? Why or why not?

Yes, I agree with the recording of the losses for the year 2007. The reasons why I agree are as follows:

To depart from IAS 10 "events After the Balance Sheet date" and IAS 37 "Provisions, Contingent Liabilities and Contingent Assets", by booking in estimated consolidated income for the 2007 financial year a provision for the total cost of the unauthorized activities. This would not allow a fair presentation of the 2007 financial statements. There is an exception that would allow the auditors to ok this and that is IAS 1 which states in order to present fairly its financial position as of December 31, 2007 and show the