Preliminary agreement on EU audit reform reached

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24 Dec, 2013

The Lithuanian EU Council Presidency and the European Parliament have reached a preliminary agreement on the framework of EU audit reform at the final trilogue meeting held this week. The framework is now subject to the final agreement by member states in coming weeks.

Under the new rules, the societal role of auditors will be clarified, with the aim of increasing audit quality and transparency. Mandatory rotation of auditors will be introduced, requiring companies to retender at 10 years and change the auditor at least every 20 years. The reforms include further restrictions on the provision of non-audit services to audit clients and prohibit the use of restrictive clauses in contracts which limit a company’s choice of auditor. 

Commissioner Michel Barnier welcomed the provisional agreement, calling it a “first step towards increasing audit quality and re-establishing investor confidence in financial information, an essential ingredient for investment and economic growth in Europe.”

The Financial Reporting Council’s (FRC’s) CEO, Stephen Haddrill, added: “This is a good compromise, made possible by the UK developing a plan, showing it was practical and thereby giving confidence to MEPs and policymakers.”

Sue Almond, Technical Director at ACCA (the Association of Chartered Certified Accountants), also congratulated the European Parliament, the Council and the European Commission on reaching an agreement after months of tough negotiations.

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