EU green paper calls for softer stance on audit

A EUROPEAN PARLIAMENT green paper on auditing policy has recently become “much more balanced” and less likely to engender box-ticking audits, according to one MEP.

Syed Kammal MEP, Conservative shadow lead member in the legal affairs committee, said the revised paper supports “flexibility” and is less drastic than initial proposals that called for mandatory rotation every eight years.

Kammal implied the paper does not support joint audit – another proposal, considered radical by some – to bolster competition and choice in the audit market.

He said: “Our job as lawmakers should be removing obstacles to competition in the audit industry, not creating more prescriptive rules that cost UK and EU businesses millions.”

An EU green paper on audit is currently being prepared, the investigation being headed by European Commissioner for Internal Market and Services Michel Barnier (pictured), considered by some to be radically pro-competition and likely to favour some of the stronger solutions proposed.

The commission is due to draft legislation in November and this paper sends a message about the European Parliament’s position that should be taken into consideration. Originally drawn up by Antonio Masip Hiodalgo of the Spanish Socialist Party, the first draft urged the commission to favour mandatory rotation.

A spokesman for Kammal said opponents managed to build a coalition with the support of the centre-right European People’s Party. The text now recommends the commission “explore the option” of mandatory rotation and “voluntary joint audit”, though calls on commissioners to respect the fact that real independence comes from rotation of audit partners within firms.