America has put the mockers on EU audit reform
Decision to prohibit mandatory rotation in the US puts question mark over EU audit policy
EUROPEAN POLICYMAKERS don’t seem the type to be in thrall to decisions taken on the other side of the Atlantic. Nevertheless, those steering the EC’s planned overhaul of the audit market through European parliament will no doubt have been dismayed by developments in the US.
Earlier this week, the US House of Representatives essentially slapped down attempts to force listed companies to change their auditors. The PCAOB had argued, via a concept paper released in August 2011, that mandatory rotation was needed to improve auditor independence. Sound familiar?
Politicians in Europe are currently wrangling over the shape of a series of audit market reforms, while the UK competition watchdog is cooking up a series of remedies aimed at breaking the Big Four‘s dominance of the FTSE 100 audit market.
With so many firms – including the likes of Grant Thornton and BDO who are most likely to benefit from any change – against the idea of mandatory rotation (most appear to favour the FRC’s comply or explain approach to tendering) the argument for scrapping the EU plans has just gained considerable weight.