Brussels, 01/12/2011 (Agence Europe) - EU Internal Market Commissioner Michel Barnier has been forced to rework his draft legislation to reform the world of auditing by 2015 for big European companies quoted on the stock exchange, much as he has had to scale back his sweeping reforms of the rules governing credit rating agencies. The draft auditing legislation unveiled by the European Commission on 30 November 2011 has abandoned the idea of joint auditing at EU level (see EUROPE 10498 and 10459). In a press release, the commissioner commented: “On joint audit, we believe that the concept has certain appeal. But for the time being, in the face of strong criticism on the practicalities, notably from countries that have tried it in the past, we have decided not to make it mandatory. However, given the benefits of the 'four eyes' principle, we are encouraging it, especially by allowing longer rotation periods when joint audit is used.”
In order to encourage the emergence of new auditing firms alongside the Big Four (KPMG, Ernst&Young, PriceWaterhouseCoopers and Deloitte Touche Tohmatsu), the Commission is taking a three-pronged approach: after an initial four-year standoff, companies will have to change their auditors every six years (nine years for joint auditing). Restrictions will be banned that require financial documents to be drawn up by one of the Big Four. Auditing company ownership rules will be opened up.
Barnier explained: “It is now high time for auditors to respond to the societal role that they are entrusted with. Moreover, it is critical to address serious shortcomings in the audit sector.” In order to reduce conflicts of interest between auditor and auditees, the Commission recommends that auditing firms be banned from providing consultancy and very large firms will no longer be allowed to provide non-audit services (certifying annual accounts, for example). To improve the functioning of the single market, the draft legislation sets up a European Passport system for qualified auditors and an EU quality label. The European Securities and Markets Authority (ESMA) will be given a bigger role in coordinating the supervision of auditors. (MB/transl.fl)