The International Federation of Accountants (IFAC) has predicted that certain aspects of the EU audit reform voted through the European Parliament last week could potentially cause regulatory divergence and fragmentation.
Although the reforms imposed a number of rules, member states were give some flexibility in terms of implementation. For example states will be able to introduce shorter tendering and rotation periods, and lower the cap on fees earned for non-audit services to audit clients.
Commenting on the reform, IFAC chief executive officer Fayez Choudbury said that by providing individual member states with options, the reform will create a patchwork of regulation across the EU.
IFAC suggested that these options were "perhaps ones introduced in order to ensure its successful passage."
Choudbury added "failure to decide a consistent approach to audit regulation within Europe does not auger well for the chances of agreement among the global community."
Speaking to The Accountant for the 2014 World Survey, IFAC president Warren Allen said the push for mandatory rotation in the reforms would create a "mishmash" amongst the international community.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below formBy GlobalData
"The US won’t escape it totally because its multinational corporations operating in Europe will have to comply with those EU reforms. Convergence of regulatory activity around the world was initially on the G20 agenda but dropped off. A coordinated approach to regulation needs to be taken," he said.
IFAC said other areas of the reforms provided a more globally consistent approach, and Choudbury said IFAC supported this.
Although the reform has now passed the European Parliament, it still needs EU Council approval before coming into force.