The EU piles into the audit debate too
In October the EU launched a little heralded consultation. Inside the audit profession it grabbed a lot of attention. If anything like the proposals it contains is implemented I would be staggered. It is a sign of the times though that some of them are even being mentioned by our friends in Brussels and Strasbourg.
Headlines from the paper dealing with the governance of audit firms include:
- taking audit appointments out of the hands of the directors and shareholders giving it instead to an independent body;
- requiring audit appointments to be time limited;
- restricting the amount of non-audit work audit firms can undertake;
- capping the amount of fees that an audit firm can earn from a single client;
- asking national public sector audit organisations to audit the accounts of audit firms;
- changing the ownership structures of audit firms; and,
- beefing up the role of auditors of group accounts.
The EU is concerned that audit arrangements are not robust enough to help ensure we avoid future financial meltdowns like the one brought to us by the banking crisis.
These are ‘courageous’ proposals. That’s shorthand for ‘you must be joking’. I imagine that the accountancy big guns have lengthy submissions in the system that boil down to, ‘don’t do it’.
All of this is interesting to us armchair auditors because of the changes to the English audit arrangements for local public bodies. The abolition of the Audit Commission – which does the independent appointment of auditors envisaged by the EU – is meant to herald an era of councils appointing their own auditors.
So as EU policy heads in one direction England’s heads in another. Not something that worries our government too much I suspect. However, I can’t help but think that the sorts of issues that worry the EU are no different in character to ones that will come over the horizon if the changes in English audit arrangements are not properly thought through. Strangely enough some of the accountancy profession may agree with me on that.
Fingers crossed then.