The measures proposed for reform of the listed company audit sector in the European Union were approved by plenary vote in European Parliament today, reaching another key milestone in the long, sometimes contentious process.
The key elements of the new rules, among others, include:
- Production of more detailed and informative audit reports by auditors.
- Audit firms required to rotate after an engagement period of 10 years. After a maximum of 10 years, the period can be extended by up to 10 additional years if tenders are carried out, and by up to 14 additional years in case of joint audit.
- Audit firms strictly prohibited from providing certain non-audit service to clients.
- Imposition of a cap on the fees generated for non-audit services other than those prohibited based on a three-year average at the group level.
- Enhanced cross-border mobility for auditors and the harmonisation of International Standards on Auditing (ISAs).
- Prohibition of restrictive 'Big Four only' third party clauses imposed on companies.
Bob Dohrer, RSM’s Global Leader – Quality & Risk, said: “The reform measures proposed through negotiations within the EU late last year have passed the plenary vote in the EU Parliament as expected. The focus of attention now switches to consistent implementation of the measures across the EU member states as well as the resulting impact on the audit profession in jurisdictions outside of the EU. However, this is just one goal post and we look forward to continuing dialogue and being active in the future debate as we focus on reforms to enhance audit quality and the development of the profession as a whole.”