Controversial new rules on regulating the auditing profession moved a step closer to implementation yesterday after EU member states reached broad agreement on some of the most contentious aspects of the proposals.
Speaking after the Competitiveness Council meeting in Brussels yesterday, Minister for Enterprise Richard Bruton said there had been "broad support" from member states for the principle of mandatory auditor rotation, a key strand of proposals designed to overhaul the auditing profession.
Term of service
Under the latest proposal – seen by The Irish Times – companies and public interest entities would be forced to change their auditors after seven years, but the term could be renewed for another seven years, subject to certain criteria. This compares to the original European Commission proposal to limit the term to six years, with possible extension to eight years.
The latest council position could leave member states on a collision course with the European Parliament, which last month voted to lengthen the minimum rotation period to 14 years, with an option for national authorities to extend this to 25 years in some cases.
Agreement between EU member states and the European Parliament is needed to bring forward the legislation, with EU internal markets commissioner Michel Barnier pushing for sign-off by year-end.
Discussions between member states have been ongoing over the last few months at official level under the Irish presidency of the Council of the European Union. It is hoped member states will reach an official position in the next few months, when negotiations with the European Parliament start.
Negotiations on the revision of the EU’s auditing directive are taking place against a background of intensive lobbying by accountancy representatives and the “big four” accountancy firms, which argue that the rules are impractical and will lead to extra costs.
Profession's failure
But the commission is keen to reform the way the auditing industry works, following the failure of some of the world's top accountancy firms to spot financial irregularities in bank audits during the years preceding the financial crisis.
The latest proposal also includes a revised suggestion on the question of the provision of non-audit services by auditors.
