The European Commission published its proposals on changes to audit regulations in November 2011. These become law only by agreement of both the European Parliament (EP) and the European Council of Ministers (EU Member States). Three Parliamentary committees were involved in developing their own views on the proposals. JURI is the lead committee which drafted the report comprising of amendments to the EC’s proposals. It voted in April 2013.
The current (Lithuanian) Presidency of the Council has agreed its revised set of proposals and will now pursue discussions with the European Parliament and the European Commission to try to reach agreement on a common text. If this is achieved, the common position will be put to a plenary vote in the Parliament, provisionally scheduled for February 2014.
The EC proposals apply to the statutory audit of all public interest entities (PIEs) namely all listed companies and the majority of financial institutions, regardless of size. The proposals included the following key provisions:
We are supportive of measures to enhance audit quality, strengthen the independence of the auditor, and foster competition; and believe it is critical that proposals regarding the audit regime and regulation should focus on building greater confidence in the capital markets and facilitating economic growth.
The Deloitte audit reform briefing sets out Deloitte’s support for changes that demonstrate improvement in audit quality; but also details those about which we have concerns, as they do not advance the stated objectives and will have significant negative unintended consequences.