A transparent and uniform system of financial reporting requires a sound infrastructure. A key element of that is enforcement. Enforcement encompasses all the procedures employed in a country in order to ensure that accounting principles and standards are applied properly. A key feature of enforcement is the ability to require the restatement of financial statements that do not comply with applicable accounting standards.

FEE has published a major factual study of enforcement mechanisms that exist in Europe. Six different levels of enforcement are distinguished:

· Self-enforcement: preparation of financial statements
· Statutory audit of financial statements
· Approval of financial statements
· Institutional oversight system
· Judicial: sanctions/complaints
· Public and press reactions.

The study focuses on the enforcement of financial reporting standards by means of reviews that are substantive in nature, rather than limited to formal checks. It concludes that for nearly half of the countries surveyed, there is no such oversight system in place. In some of these countries, the need to establish an institutional oversight system is currently under consideration.

Position Paper