Firms, professional bodies and regulators have welcomed the vote from the European Parliament on the long awaited audit reform, arguing that it will increase competition and audit quality. Nevertheless the profession issued some concerns with regards to implementation in national law on the part of member states.

Grant Thornton International global chief executive officer Ed Nusbaum told the International Accounting Bulletin: "This reform is a combination of different provisions that will make some of the toughest rules in the world."

Nusbaum said that the key element of the reform was the positive impact for the investors as it will allow them to obtain the information they need. He said that if taken as a whole, the reform was a positive achievement.

"While not everyone agrees with every measure, the vote wasn’t unanimous; overall on the long term it will have a positive impact on the audit but most importantly on the entire environment as it will have a positive impact for the investors," Nusbaum said.

The UK Financial Reporting Council (FRC) chief executive officer Stephen Haddrill expressed satisfaction that that EU legislation "will now be following the UK’s example of retendering an audit every 10 years".

"For the FRC, these developments are most important because they contribute towards the enhancement of quality in financial reports and audits that can engender trust within the investor community, not only in the UK, but across Europe," Haddrill said.

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The Institute of Chartered Accountants in England and Wales chief executive Michael Izza said that even though some areas of change were not a source of enthusiasm, everybody had now accepted that these were the new rules under which companies will have to operate.

"We are already seeing changes emerge in the market, including the UK, with long-standing audit engagements being put out to tender and audit committees being more prescriptive about the kind of non-audit services they ask the auditors to provide," he said.

Implementation issues
Izza also warned that the legal process was far from completed as it’s now up to each member state to implement the regulation and transpose the directive into national law.

An idea to which RSM global leader of quality and risk Bob Dohrer agreed to: "The focus of attention now switches to consistent implementation of the measures across the EU member states as well as the resulting impact on the audit profession in jurisdictions outside of the EU."

The Federation of European Accountants (FEE) shared Izza and Dohrer’s concerns with regards to the implementation of the reform. FEE chief executive Olivier Boutellis-Taft said that many aspects of the legislation will be complicated to implement in practice.

"The significant number of member state options hinders the internal market and the creation of a truly international playing field," he said.

At the Association of Chartered Certified Accountants (ACCA) external affairs director Sue Almond agreed that a consistent implementation across Europe was the remaining challenge. "It is important for this to be done in a way that there is no gold-plating and it does not impose unnecessary burdens on business," she said.

However Almond said "the final position is a balanced compromise that will enhance the functioning of the single market and stimulate economic growth". She highlighted the fact that ACCA was particularly pleased with the adoption of "high-quality global standards", such as the International Standards on Auditing (ISAs) in the final text, "a way to enhance value from the audit" according to her.

While welcoming the regulation, EY raised some questions in a statement regarding the economic cost of the legislation and its impact on audit quality and shareholder choices.

"We hope to continue our dialogue with policy makers as each member state moves to implement the legislation so as to assist in the development of rules that will enhance investor confidence," an EY spokesperson said.

The reform still has to be approved by the Council of the EU. Most of these provisions are to take effect within two years of the package’s entry into force, but the restriction on fee income from non-auditing services is to take effect within 3 years.

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