The European Council has authorised the Lithuanian presidency to start trialogue discussions with the European Parliament and the European Commission on the European audit reform document.
The Council’s Committee of Permanent Representatives (COREPER I) is said to have reached an agreement on the document on Friday and the trialogue can now go ahead later this month.
This puts the European reform one step closer to a final reform or directive.
The International Accounting Bulletin is currently trying to access more information on the actual proposals made by COREPER I, however, according to Reuters, unnamed sources said the Council agreed on maximum audit tenure of 20 years for all companies apart from banks and other systemically important companies for which the maximum would be 14 years.
Reuters’s sources also said the Council suggested an advisory fee cap was set at 70% of the audit fee and rejected the idea of the European Securities and Markets Authority (ESMA) as the main regulator for auditors.
If the Reuters information is correct, this would be another watered down version of the initial proposals by the European Commission, which suggested mandatory rotation, severe caps on non-audit fees, joint audits, and many other remedies, as ways of improving the European statutory audit market.
The proposals were debated in the EU Parliament before going to the Council.
In it’s final decision document, the European Parliament Committee on Legal Affairs (Juri), the lead parliamentary committee, suggested mandatory audit firm rotation every 14 years and that the longest time for an audit engagement can be 25 years.
The Association of Chartered Certified Accountants (ACCA) technical director Sue Almond told International Accounting Bulletin that based on the information currently available mandatory audit firm rotation is likely to be implemented in the EU. "The only question is over the maximum length of the audit engagement."
Juri green lights audit reform proposals