03 October 2014

ACCA: Implementing the new audit reform

A roundtable hosted by Sajjad Karim MEP, and jointly organised by ACCA and EGIAN at the European Parliament concluded that the challenge is implementing the new requirements in a consistent and constructive way.

In June 2014, the new audit reform package – including a Directive amending the 2006 Statutory Audit Directive and a new Regulation covering Statutory Audit of Public Interest Entities - finally ‘technically’ entered into force in the wake of the financial crisis. The new requirements will bring about the most far-reaching changes to auditing since the EU's formation over half a century ago. Whether they will lead to the hoped-for changes in the market, however, will depend to a significant extent on how Member States will exercise the many options offered by the new texts in implementing the new legislation, together with the approach taken by audit committees and investors in the case of Public Interest Entities (PIE) audits.

To help raise awareness on the issue, ACCA and EGIAN organised recently an informed experts’ roundtable hosted by Sajjad Karim MEP, to discuss a number of implementation issues. These ranged from the permitted extension of the mandatory rotation period in the event of public tendering or joint audit, the tendering process, the provision of non-audit services, to the possible future direction of SME audits. The event also provided an opportunity to hear the views of the European Parliament, of the EC, of institutional investors, of the business community, and of the auditing profession on the desired future shape of the audit market. The debate revealed a clear call from businesses, investors and the audit profession for timely clarity from Member States on their choices of options in order to allow for effective implementation that will ensure the main objective of the reform - improving audit quality - is reached.

Sajjad Karim MEP host of the event, said: 'Over the past few years we have been able to develop a strong working relationship between members of the European Parliament and the audit profession. It is absolutely vital that the profession is able to access the Parliament and have its input. This allowed us over time to turn around something that seemed to be quite insurmountable when I first took on the task, into a very workable set of proposals that will work for EU citizens, for our companies and businesses, and for the audit profession as well. It is essential we carry on this sort of dialogue and I hope that the next time you will be back in this house, we will have made huge progress in the implementation phase.'

Sue Almond, ACCA Director of External Affairs, who chaired the event, said: 'The challenge that all stakeholders now face is implementing the new rules in a consistent and constructive way. The foundations are there with the recognition and adoption of requirements that are broadly consistent with global standards in many places. The EU rules also recognise the critical role of the audit committee in some of the more contentious areas of reform, such as auditor rotation and non-audit services. However, there are many practical challenges as these rules become reality – whether for member states, businesses or audit firms. And, as throughout the debate on what the rules were to be, it will be critical investors and businesses speak out on these matters. It was encouraging that the debate concluded not on the detail, but by linking this detail to audit quality, which is exactly where we started, as improving quality is the main aim of the reform.'

Jos van Huut, Chairman of EGIAN, concluded: 'June 2014, after almost four years of difficult - and even emotional at certain stages - debate, marks the end of a political process at EU level. It took an enormous effort to get to agreed positions, reflecting different interests of different players, as well as different traditions across Europe. Today’s debate shows that implementation will not be easy either, there are many Member State options in both the Directive and the Regulation, creating the risk that measures will differ across Europe, and as a consequence jeopardise the concept of the single market. If the reform is to achieve its full potential, the EU, Member States, investors, boards, audit committees, and audit firms, all need to be actively involved. That is why we all need to cooperate and to continue the dialogue we started this afternoon.'

Press release

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