EU legal affairs committee approves draft audit reform proposals
The European Parliament’s legal affairs committee have approved a draft agreement for EU audit reform in the hope that it will open up the EU audit services market beyond the dominant Big Four firms.
The EUs legal affairs committee voted in favour of the measures agreed in December. Read more in our previous blog Preliminarily agreement reached on the EU audit reform . These measures will force large-listed companies to change the firms that audit their accounts on a regular basis.
The British MEP responsible for the audit reform package, Sajjad Karim, welcomed the reforms. He feels the draft piece of legislation will have positive outcomes and not just in the audit market but in the financial sector as a whole also.
As part of a series of measures to open up the market and improve transparency, the draft audit reform text introduces a prohibition of “Big Four-only” contractual clauses requiring that the audit be done by one of these firms.
MEPs also agreed on a mandatory rotation rule whereby an auditor can inspect a company’s books for a maximum ten years, which may be increased to ten additional years if new tenders are carried out, and by up to 14 additional years in case of joint audits, when a firm is being audited by more than one audit firm.
Also because of this EU audit reform coming to place, the UK Competition Commission has put on hold its audit reform consultation process by up to six months. The Commission don’t want their new audit reform to contradict or duplicate EU regulation. So because of this they have put on hold their audit reform consultation process to enable them to consider fully the implications of the EU proposals on their own orders. Read more in our previous blog Competition Commission delays audit reform consultation by up to 6 months
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