New EU rules on audit reform were adopted by the Council of the European Union in April 2014.  The new rules are in the form of a Directive amending the Statutory Audit Directive(Directive 2006/43/EC) (link to Europa website) and a Regulation on specific requirements regarding the statutory audit of public-interest entities (PIEs).  The rules of the Directive have to be incorporated by Member States into national law by 17 June 2016 and the Regulation is effective from 17 June 2016. 

In line with the new EU rules, the Government has announced that all public interest entities (listed companies, banks, building societies and relevant insurers) will have to put their audit tender out at least every ten years and change auditor at least every 20 years.  The audit tender requirement is in line with that included within the Competition and Markets Authority (CMA) final Order implementing reforms of the audit market in the UK which include a requirement that FTSE 350 companies put their statutory audit out to tender at least every ten years.

The government has also announced that the Financial Reporting Council will be the UK competent authority for the regulation of auditors but that regulatory activities will continue to be carried out by the recognised supervisory bodies (RSB’s) (such as the ICAEW) that meet specific criteria under the delegation of the FRC.  It indicated that “overall this would mean the FRC would only have to conduct audit inspections, investigations and disciplinary cases in relation to public interest entities, and would oversee the work of the recognised supervisory bodies for other audits”.

The Government is due to publish a more detailed consultation which will build on responses received to its December 2014 Discussion Paper on audit reform.

The written government statement is available on the Parliament website.