The City has thrown its support behind European Commission proposals to strengthen the regulation of auditing firms that sign-off the accounts of companies listed on European stock markets.

But Britain’s audit watchdog,the Financial Reporting Council, and the big accountancy firms remain concerned over how and when the new rules will be applied.

The directive gives national regulators the power to force the auditors of any company seeking to issue shares in Europe to meet European standards. Those auditors from countries not deemed up to scratch will have to register in Europe and be subject to regular inspections.

A similiar regime in the US, introduced via the Sarbanes-Oxley Act, led to an exodus of foreign companies from US exchanges.

[1] Telegraph.co.uk: EC to adopt pragmatic view on audit directive