EUROPEAN PARLIAMENT today voted to reform the way audits are conducted imposing mandatory rotation.
Under reforms drafted by British MEP Sajjad Karim (pictured), companies will be obliged to change their auditor every 14 years - although this may be extended to 25 years by member states if they fulfil certain criteria.
MEPs voted to adopt a series of measures designed to improve the audit process and instil greater transparency and confidence in the way audits are conducted.
Speaking after the vote in the European Parliament Legal Affairs Committee (Juri), Karim said: "Reforming the audit sector is crucial to boost confidence in the financial markets, and to support growth and investment in European companies.
"We have consistently advocated an international approach, adopting global standards which promote audit quality. It is no surprise that regulators in the US and around the world are watching us closely and the vote this morning signals loud and clear that we are taking the right steps."
Karim's original proposal proposed a long back-stop period, of 25 years, in contrast to the European Commission's plan to intervene in the market on a six year basis.
The report was voted through Juri with the support of MEPs from the European People's Party and Alliance of Liberals and Democrats for Europe.
The reforms will go before the full European Parliament later this year.
In most cases, this new rule will simply add costs to companies being audited while wasting the precious experience and insight of auditors who are familiar with a company.
Posted by: David, 25 Apr 2013 | 17:34
Does this effect all companies or only listed? Will the time limit apply from when first appointed or from the date the proposals are introduced?
Posted by: Steven, 26 Apr 2013 | 13:25
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