A CONTRACT for Mazars and the ICAEW to investigate the costs and effects of using IFRS within the EU has been scrapped after they were accused of having "overwhelming conflicts of interests" in its outcome.
Mazars and the ICAEW were commissioned by the EC to investigate IFRS reporting in the EU and assess the impact of the switch to IFRS on the comparability and transparency of the financial reports of European companies.
However, the contract has been cancelled by internal markets commissioner Michel Barnier [pictured] after European politicians raised concerns that Mazars and the ICAEW had "vested interests" in the review's findings, despite pledges made during trilogue discussions that the review would be conducted by independent and objective parties.
In a letter sent to Barnier, Sharon Bowles, chair of the European Parliament's Econ committee and Dumitru Stolojan, the committee's vice chairman, questioned whether they were suitable appointments. She pointed out that Francoise Flores, chairwoman of EFRAG - the body responsible for ensuring IFRS are endorsed in the EU - is a partner at Mazars, and the ICAEW's main IFRS taskforce is made up of representatives of the Big Four and members of the IASB, the body responsible for setting global accounting standards.
"I have taken note of your comments on the choice of contractors for the study and considered the arguments you have put forward. On balance, my assessment has led me to instruct my services to terminate the contract," Barnier said in a letter sent to Bowles, seen by Accountancy Age.
Mazars and the ICAEW strongly rejected that their involvement "may have compromised the independence of this study".
"Mazars and the ICAEW successfully bid for this project during an open, transparent and competitive tendering exercise. Each of us has a long and successful track record of delivering on these kinds of public interest projects with integrity and impartiality," they said in a joint statement.
"We have been given written assurance by the Commission that the decision to terminate does not in any way put into question our competency and independence in this matter."
Barnier also said he would be launching an investigation into governance failings within the organisation responsible for setting international reporting standards after it was accused of operating a chaotic filing system.
Earlier this week, the IFRS Foundation, the oversight body of the IASB, admitted that it had delivered late and inaccurate filings to Companies House and that it had failed to inform the repository "on a timely basis" that certain directors had their positions at the organisation terminated.
In some instances, the IFRS Foundation informed Companies House about the termination of its directors many years after the action had taken place. Under the Companies Act 2006, UK companies are required to notify Companies House within 21 days when directors' positions are terminated.
Paul Volcker, the well-known US economist, stepped down as chairman of the IFRS Foundation on 31 December 2005. However, documents were not published on Companies House until 7 February 2012.
Similarly, records show that Tommaso Padoa-Schioppa stepped down as a director at the IFRS Foundation on 1 November 2010, but Companies House did not publish the records until 2 February 2013.
In their letter to Barnier, the MEPs called on the EC to launch an investigation into the IFRS Foundation and claimed the organisation's reporting irregularities were "unacceptable for a recipient of EU funding".
They called for the vote on the foundation's new funding package to be suspended until concerns over its reporting failings have been addressed.
Barnier said he "shared" the MEPs' concerns and has "asked my services to further investigate the issues". However, he called on Bowles and Stolojan to "reconsider your position on the financing programme".
"In a few limited cases such notifications were not provided on a timely basis," Yael Almog, executive director at the IFRS Foundation, wrote in an open letter published on the IASB's website in response to reports about its filing issues.
"In 2012, we introduced new procedures that corrected these historic anomalies and I can confirm that the list of directors is fully up to date as of 31 December 2013."
The IASB was not immediately available for comment.
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