In the Permanent Representatives Committee (COREPER I) today the Member States approved the compromise text regarding the Proposals for a new Regulation and for amendments of Directive of the European Parliament and of the Council on EU audit market reform. After the preliminary agreement on the proposed reforms earlier this week by the Lithuanian Presidency i and the European Parliament during the final trilogues on 16-17 December, this allows reaching a first reading agreement, after the formal voting in the European Parliament and later in the Council.
“Under the compromise text, the Member States agreed today to introduce more stringent rules for the auditors and audit firms that are aimed in particular at strengthening the independence of auditors of public interest entities (PIEs) as well as at assuring greater diversity into the current highly-concentrated audit market. Furthermore, the reform is envisaging more coordinated approach to the supervision of auditors in the EU that will be leaded by the Committee of European Audit Oversight Bodies (CEAOB)”, said Lithuanian Finance Minister Rimantas Šadžius.
After the intensive trilogue negotiations that were underway from the middle of October 2013, the COREPER agreed also concerning mandatory rotation of statutory auditors and audit firms of PIEs. The agreement includes the 10 years basic period after which member State may allow the auditor or audit firm to continue audit of the same PIEs up to the maximum duration of 20 years where a public tendering is conducted and up to 24 years in case of a joint audit.
It was also agreed that particular non-audit services for audited PIEs will be prohibited, but Member States will have the right to allow some tax and valuation services to be provided if they are immaterial and have no direct effect on the audited financial statements.
The package also includes the 70% cap for the fees from non-audit services provided by the audit firm for audited undertaking, and the agreement on the framework for audit oversight cooperation, which shall be leaded by the CEAOB, but which will use also the experience of the European Securities and Markets Authority (ESMA) in the sphere of international cooperation between Member States and third countries in this area of audit oversight.
“I believe that the agreed audit reform package should enhance the quality of statutory audits in the EU and will help to strengthen confidence in audited financial statements, in particular those of banks, insurers and listed companies” concluded Minister Rimantas Šadžius.
The Proposal on the changes of Audit directive 2006/43/EC and new Proposal on Audit regulation was presented by the Commission in November 2011.