On 25 April 2013 the EU Legal Affairs Committee voted to support a package of measures designed primarily to improve audit quality and transparency, boost investor confidence in company audits and open up the EU audit services market.
Under the reforms there will be a mandatory rotation rule, whereby companies will be required to change their auditor after a maximum of 14 years. This is an increase to the six-year period previously proposed by the Commission. Under the revised proposals the 14-year rotation period can be extended to 25 years if certain criteria are met, including when:-
- a public tender is carried out after 14 years;
- a comprehensive assessment by the audit committee is undertaken; or
- the company has joint auditors.
Under the proposed rules there would also be a prohibition on "Big Four only" contractual clauses requiring that the audit be completed by one of those firms.
The full reforms should go before the European Parliament later this year.