DRAFT AUDIT REFORMS: KEY POINTS

● Mandatory rotation
Companies will have to change audit firm after a maximum of six years, or nine years if they employ more than one auditor. Audit firms will not be allowed to tender for the same client’s business until after a four-year “cooling-off” period when the contract ends.

● Mandatory tendering
The biggest companies will have to go out to tender to choose a new auditor, with stricter rules around appointing a new firm and a bigger role for the audit committee.

● Ban on non-audit services
Audit firms to be banned from providing any non-audit services to audit clients. The biggest auditors will have to hive off their audit work from non-audit activities.

● Ban on Big Four-only contracts
Companies to be banned from signing any contracts from banks, lenders or investors that have clauses requiring them to be audited by one of the Big Four firms – PwC, KPMG, Ernst & Young, or Deloitte.

● EU-level regulation of auditors
Auditors will be regulated at EU level by the European Securities and Markets Authority (ESMA) to make sure companies with operations across the region have all subsidiaries audited to the same standard.