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, JURI, ECON and ITRE have been involved in developing their own views on the proposals:
The next stage in the legislative process involves the European Council of Ministers. Council will now aim to reach a consensus position on the reforms among the 27 Member States, based on a 'trilogue' process designed to agree a final position between Council, Parliament and the Commission, to enable a plenary vote of the Parliament and approval by the Council. This could take place before the end of this calendar year.
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.