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its statutory requirements such as: (1) whether proper accounting records have been maintained by the company; (2) whether proper returns have been received from branches where the auditor does not visit; (3) whether the financial statements agree with the accounting records; and (4) whether the auditor has received all information and explanations necessary.(n104) In contrast, because there are only private audits in the United States, the auditor is simply required to attest to the fairness of the client's financial statements in all material respects, unless SEC requirements mandate specific additional disclosures.

With respect to auditor's liability in tort to third parties for negligent misstatement, the situation is not entirely clear. Although reasonable foreseeability language does appear in the cases, various forms of a "proximity" (privily/near privity/foreseeability) test are also called for.(n105)


France has a high degree of government influence in the handling of accounting and auditing matters. In 1947, Le Plan Comptable General (National Uniform Chart of Accounts) was issued and detailed the types of balance sheet and income statement accounts that may be used as well as model financial statements.(n106) This standardization plan was originally mandated to create uniformity in the accounting of the country's nationalized industries such as iron, coal, steel, and railways as well as the "few largest publicly held companies."(n107) Successive government acts extended the plan to many publicly and privately-held companies and it currently is mandatory for all reporting entities and industries in France.(n108)

A statutory (or legal) audit has been required for over one hundred years of all societes anonymes (stock corporations) with share capital in excess of 300,000 French francs. These companies must have their accounts examined by one or more commissaires aux comptes (statutory auditors).(n109) These auditors are chosen by the company's shareholders for a six- year term; however, this term is revocable. Statutory auditors are also required to "certify whether accounts of the firm -- and all reports and financial statements addressed to shareholders by management and the board of directors -- meet the standards of `regularite' and `sincerite."'(n110) According to the 1982 version of the Plan Comptable General, regularite means conformity with existing rules and regulations, while sincerite means the good-faith application of existing rules and regulations by those responsible for the company's accounts.(n111) In addition to these statutory responsibilities to shareholders, the auditor is supposed to ensure that the governmental regulations and tax laws are not violated.

These responsibilities go well beyond those of auditors in the United States. However, like the United States, French auditors are required to be independent of the board of directors of the client company. Unlike the U.S. practice of negotiating fees based on time spent on the audit engagement, a 1966 French law established a fee schedule for auditors performing the attest function whereby auditing fees are established using a sliding scale based on a formula related to the size of the audited firm.(n112) Nevertheless, a commissaire may ask the client to pay more than the legal fee; however, the client is not required to do so. In addition, auditors are required to certify to "the truth and fairness of accounts and financial statements examined."(n113) This law further provides that only individuals whose names appear on the official list of commissaires aux comptes may perform statutory audits.


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