EU finally passes rules to shake-up audit market

 
Kate McCann
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AFTER years of negotiation, the European parliament yesterday approved a law aimed at preventing any listed company from using the same accountancy firm for more than 20 years.

The new EU rules, which come into force in 2016, will force businesses to change auditors every 10 years, although contracts can be extended by a further 10 years as long as the contract is put up for tender.

If the company appoints two or more firms the contract can be extended by 14 years.

The changes will also ban some types of work being undertaken, including tax advice and investment strategy, and will limit fees for other non-audit work to 70 per cent.

The big four accountancy groups, PwC, Deloitte, KPMG and Ernst & Young, had heavily lobbied EU politicians but failed to derail the bill. PwC said it was concerned some of the changes will reduce competition and shareholder choice by taking away the ability of a company’s audit committee to keep an auditor.

And David Barnes, Deloitte’s managing partner of public policy, said it was concerned that a “patchwork” of different regulations for multinationals could emerge across the EU.

The UK already requires listed companies to consider switching accountants every decade.

The new EU law is expected to be rubber-stamped by the bloc’s member states without changes.