Audit & Risk

MEPs call for stronger reforms to external audit market

Members of the European Parliament on both sides of the political spectrum have proposed that companies should have two auditors to check their books. This, they argue, would strengthen plans to increase competition and reform the audit market so that the big four are no longer as dominant.

in News.

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MEPs are not the only group to favour more competition. Institutional investors and associations responsible for funds worth €732bn (£590bn) have recently urged legislators to strengthen proposals to reform the audit market by backing auditor rotation every 15 years and restricting non-audit work for audit clients to 50 per cent of the audit fee.

Assembly law-makers support joint audits for listed companies, so players such as BDO, Mazars or Grant Thornton, could partner a big four firm to sign off accounts, as is common in countries such as France.

According to a report published by Reuters, Angelika Niebler, a German centre-right MEP, said the EU had to be be “more courageous” in breaking the big four’s stranglehold, while Antonio Masip Hidalgo, a Spanish centre-left MEP and member of the parliamentary legal affairs committee, said he would bring forward legislatory amendments to make the law “more reformist”.

But UK Conservative MEP Sajjad Karim, the rapporteur for the committee, favours auditor rotation every 25 years, rather than the six-year period currently being called for.

The big four have said that changes are already being effected through client action.

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