Competition Commission delays implementation of audit reforms

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17 Jan, 2014

The Competition Commission has today announced that it will delay the release of their package for audit reform in the UK. The decision to extend the timetable for release comes in light of the announcement by the Lithuanian EU Council Presidency and the European Parliament of agreement on EU audit reform, expected to come into force in Q2 2014.

In October 2013, the Competition Commission announced a final package of remedies to increase competition within the provision of statutory audit services to FTSE 350 companies in the UK.  Among other things, the proposals required that all FTSE 350 companies put their statutory audit engagement out to tender at least every ten years.  A timetable (link to Competition Commission website) published by the Competition Commission had indicated that these remedies would be effective from 1 October 2014 after Orders had been finalised. 

Subsequent to the release of the Competition Commission proposals, a preliminary agreement was reached in December 2013 between the Lithuanian EU Council Presidency and the European Parliament on EU audit reform.  These reforms proposed mandatory audit rotation with companies required to retender every ten years and change auditor every 20 years.  They are likely to be finalised and come into force in the second quarter of 2014. 

The Competition Commission are keen to ensure that their “Orders do not contradict or duplicate EU regulation”.  They further comment: 

in light of these developments we have extended our administrative timetable to enable us to consider fully the implications of the EU proposals on our own Orders. 

The revised timetable indicates that after the release of the EU audit reforms, there will be a period of informal consultation on the effect of the EU proposals.  The Competition Commission Orders will be redrafted in light of the results of these consultations and will then be subject to a further period of consultation.  The new Orders are now expected to commence in Q4 2014. 

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