Deloitte chief appeals to David Cameron on audit reform

PRIME MINISTER David Cameron has been urged to protect UK auditors from “ill-advised” European reforms which could damage the UK’s competitiveness as a global centre of finance.

John Connolly (pictured below), senior partner at Big Four firm Deloitte, sent a personal plea to the prime minister asking him to “lead the debate” in the face of audit reforms canvassed in a European green paper.

“Many of the Green Paper’s ideas are potentially damaging to our shared growth agenda and will impose costs on UK businesses without any discernable benefit,” he said.

“Making such changes seems ill-advised at this stage of the economic cycle.”

The European Green Paper proposes a radical restructuring of the audit industry including a new regulator to appoint firms, mandatory rotation and caps on advisory fees. The commission has also proposed European-wide firm registration, and is considering forcing firms to hive off their audit arms, amid a raft of new proposals to shake up the industry.

Connolly fears the proposals may reduce the competitiveness and appeal of the UK and could lead to a downturn in listings.

“Some of the…topics raised in the green paper will impose disproportionate cost burdens on business and may even harm audit quality,” Connolly said in his letter.

In its own submission to the European Commission, the Government warned against increasing regulation which it feels may increase overall costs to businesses.

“The Government is inclined to be cautious about adding to the role of audit or its regulation in relation to published accounts enhancements which have the potential to increase costs to the economy,” the submission said.

European Commissioner Michel Barnier has made it clear he will accept nothing less than structural change for the industry.

“The status quo is not an option,” he said in October.

“If you…want to start with business as usual, please don’t rely on me to take that tact.”