On 30 November 2011, the European Commission announced proposals for the reform of the statutory audit regime for listed companies and other public-interest entities, such as banks and insurance companies, with the aim of enhancing auditor independence and making the statutory audit market more dynamic.
The proposals include:
- mandatory rotation of audit firms: audit firms will, with some exceptions, be required to rotate after a maximum period of engagement of six years. A cooling off period of four years will apply before the audit firm can be re-engaged by the same company, although the four year period may be extended to nine years in cases of joint audit;
- mandatory tendering: listed companies will be obliged to have an open and transparent tender procedure when selecting a new auditor;
- non-audit services: audit firms will be barred from providing non-audit services to their audit clients;
- EU supervision of the audit sector: coordination of auditor supervision activities will be dealt with within the framework of the European Markets and Securities Authority; and
- creation of a Single Market for statutory audits: a European passport will be introduced for the audit profession thereby allowing audit firms to provide services across the EU. All auditors will be required to comply with international auditing standards when carrying out statutory audits.
Commission proposals available at: http://ec.europa.eu/internal_market/auditing/reform/index_en.htm