Brussels, 29/05/2013 (Agence Europe) -At the Competitiveness Council of Wednesday 29 May, some countries backed the idea of compulsory rotation of auditing companies, but others failed see any way of reducing the dominance of the market by the Big Four auditing firms.
The Irish Presidency of the EU Council of Ministers suggests that compulsory rotation of auditing companies should take place after at most 7 years (8 for joint audits), renewable under certain conditions for up to 7 years (8 years for joint audits). The Commission suggested a maximum of 6 years (9 for joint audits), renewable under certain conditions to 8 years (12 for joint audits). In light of the reservations, and support, expressed at the meeting, EU Internal Market Commissioner Michel Barnier said he was prepared to discuss the time period, but felt that compulsory rotation itself had been agreed upon.
Denmark and Italy back the idea as long as companies are not changed too frequently. France says compulsory rotation of auditors is the right idea as long as no changes are made to join auditing, which has led in France to the rise of a number of auditing companies. Finland says it is necessary to put a limit on the audit itself, rather than the company, because otherwise the rotation period would need to be very long. The United Kingdom sees no reason why the rotation period should be less than 25 years, which is similar to the upper limit (14 + 11 years) suggested by the European Parliament in the Karim Report passed by the parliamentary committee last month (see EUROPE 10835).
Germany and Austria, however, are sceptical about the compulsory rotation of auditors apart from in the financial industry, as long as regional banks and savings banks are exempt (says Austria). The Czech Republic says compulsory rotation would increase costs without guaranteeing independence, whereas Hungary sees the idea as unjustified intervention in the auditing market.
Blacklist. The drawing up of a blacklist of services that auditors would not be allowed to provide to a company they audit now seems to be agreed upon - an approach that meshes with that of the EP. The Irish Presidency's suggestion, however, of capping at 70% fees paid over three years for related financial audits does not seem to have found favour.
Unlike France, Germany and the United Kingdom oppose the idea of the European Market Supervision Authorities (ESMA) forming a special committee of national regulatory bodies with its own decision-making powers, in place of the European group of audit supervision bodies (EGAOB). (MB/transl.fl)