The look ahead: EU summit, US GDP and audit firm rotation

European leaders will tackle the euro zone’s debt crisis on June 28th and 29th at a full EU summit in Brussels.

At the summit, the leaders are expected to examine proposals on bank capital requirements, deposit-guarantee programmes and how to handle cross-border bank failures, according to Bloomberg.

The euro-zone crisis has depressed morale across Europe. The EU’s Economic Sentiment Indicator measured well below historical norms in April and May. The ESI decreased to its lowest level in nearly three years, falling across Europe, including in Italy, France, Spain, Germany and Portugal. Morale was down in industry, the services sector and retail; and confidence in construction dropped.

On June 28th, the EU will release an update of ESI, which is an indicator for GDP and provides a clue about the likelihood of a double-dip recession in the euro zone.

US economy

Several economic indicators – home prices, consumer confidence and GDP – will be closely watched next week in the US, which is showing signs of another slowdown.

On Tuesday, The Conference Board is scheduled to release May consumer confidence figures. Preliminary figures, released early in the month, showed that consumer confidence has been falling.

Also on Tuesday, the S&P/Case-Shiller home price index will shed light on whether the housing market is following suit. Last month, the index showed that home prices were still falling in some of the nation’s biggest cities.

On June 28th, the US Bureau of Economic Analysis will release its third estimate of first-quarter GDP figures, which consist of purchases of domestically produced goods and services by individuals, businesses, foreigners and government entities. GDP increased slowly throughout 2011, accelerating in the fourth quarter of 2011. But initial estimates showed sluggishness during the first quarter.

Audit firm rotation

The PCAOB will take the US debate on auditor independence and audit firm rotation to California, holding its second public meeting on the topic June 28th in San Francisco.

Panellists will present opinions on a concept release issued by the PCAOB on Aug. 16th. The release invited comment on how to increase auditor independence, objectivity and professional scepticism. The event will be available via webast at the PCAOB’s site.

Mandatory term limits for audit firms was the most pressing issue discussed in the release and during a public forum on the topic March 21st–22nd in Washington, DC.

Proponents have said mandatory audit firm rotation would reduce client pressure on auditors and offer a fresh look at companies’ financial reporting. Term limit opponents, including the AICPA, have said mandatory rotation would have “costly and unintended consequences”.

—From CGMA Magazine staff reports.