Financial Reporting Council (FRC) chief
executive Stephen Haddrill said many of Michel Barnier’s EC Green
Paper audit proposals are “damaging, threatening and only enhance
costs”.
Haddrill addressed the issue during the Ernst
& Young (E&Y) Financial Reporting Outlook 2011
this week, expressing concerns on mandatory joint audits, audit
only firms, mandatory rotation and the role of the European
Securities and Markets Authority.
The FRC chief executive said joint audits
would only add costs and some of the proposals, such as joint
audits, have not worked in France as the risk of information
disappearing in the gap increases when a large auditor teams up
with a small one.
As for mandatory rotation, Hadrill said this
would be damaging in the context of the financial and Eurozone
crisis, during which more flexibility is necessary.
Hadrill said there are positive aspects of the
EC’s audit reform proposals, such as the review of the scope of
audit and audit reporting, the focus on competition and contingency
planning, and deregulating accounting requirements.
Future challenges for the FRC include reforms
in strategic and farsighted organisational structures, more
proportionate sanctions and clearer independence.
