UK and Europe set to collide over joint audit

The UK risks a major clash with the European Union if a plan for joint
auditing goes ahead.

A senior member of the profession delivered the warning this week as the
debate over the competitiveness of the Big Four hotted up before a meeting of
stakeholders on Monday.

Among suggestions put forward to break the stranglehold of the Big Four on
blue-chip audits, a proposal from the Hundred Group for joint audits has
particularly worried and incensed the Big Four.

Peter Wyman, head of public affairs at PricewaterhouseCoopers, warned that
the idea could be contrary to the intentions of the European Commission’s eighth
directive this week.

‘The implication of the eighth directive is that it will not be possible for
joint auditors to accept responsibility only for the work they have done,’ said
Wyman. ‘From 2008 each auditor has to accept full responsibility for the entire
body of work.’

He said that the Hundred Group of Finance Directors appeared to be calling
for a relaxation of the EU’s eighth directive requirement for audit firms to
accept full responsibility for an audit.

‘I think that’s very dangerous,’ Wyman warned. ‘And quite clearly, so too did
the European legislators. This was a key part of the eighth directive, and so
far as I’m aware, supported by all 25 national government as well as the
European parliament and commission.

‘In everything we do, we need to look at the accounting profession and have
the highest possible quality of financial reporting and auditing. Anything that
may damage the profession should be resisted.’

Hundred Group chairman Philip Broadley has suggested that joint audits could
allow smaller firms to gain experience of big audits.

However, the eighth directive would suggest that such experience could come
with hefty liabilities if things went wrong.

The Confederation of British Industry also weighed in against the proposal
this week. Its head of company affairs, Rod Armitage, told Accountancy
that joint audits were ‘something of the past’.

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