A FRAMEWORK of EU audit reform has been preliminarily agreed during the final trilogue by the Lithuanian EU Council presidency and the European Parliament.
During the last trilogue negotiations which Accountancy Age reported would be held last night, preliminary agreement was reached over the whole legislative package of EU audit reforms, which include forcing EU listed companies to change their auditors.
The framework is now subject to the final agreement by member states later this week.
The reforms, originally proposed by EC internal markets commissioner Michel Barnier in 2010, are intended to reduce the concentration of the audit services being provided by the Big Four accountancy firms of PwC, KPMG, Deloitte and EY.
Accountancy Age understands that agreement was reached last night on many issues, including auditor rotation, but it took until today for the parties to agree on which non-audit services auditors should be allowed to provide to audit clients under the rules.
The process, which has been led by Sajjad Karim [pictured], the British MEP, had been delayed because of disputes over issues such as banning accountancy firms from giving tax advice to companies whose books they were already auditing.
The exact details of what has been agreed are yet to emerge but Karim had previously proposed that companies switch their auditor every decade, with the option to stick with the same firm for another ten years, provided certain conditions are met such as putting the work out to tender, the audit committee agrees to an extension or the company appoints a second auditor to provide a joint audit.
On December 5, Karim scrapped the scheduled informal tripartite meeting between parliament, the EU Council and European Commission, raising concerns that the reforms would drag on into 2014.
Michael Izza, ICAEW chief executive, welcomed the decision makers' ability to come to an agreement.
"There is now hope for all the required follow-up work to be completed before, rather than be stalled by, the EU elections next year," Izza said.
"The debates on audit reform have been going on for three years; a lot of work has gone into it and it carries with it a lot of new requirements, some of which will automatically be translated into law at country level and some that will take longer to trickle through.
"While we have been concerned about certain parts of the proposals, focus now needs to move to the transition and practical implications. It is important not to underestimate the considerable practical impact the reform package will have - not only on the auditing profession but also on companies across the European Union. It will take time for everybody involved - the profession, businesses, regulators - to work through the details and get to grips with all the changes."
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