The National Competition and Market Commission recently announced its view that the draft Audit Act’s permissive 10 year term limit for audit companies auditing Public Interest Entities is too long to ensure the independence of the audit firms. The commission called for a review of this term limit as well as clarification of the distribution of supervisory powers between the Spanish Institute of Accountants and Auditors (ICAC) and the Commission.
The President of the Spanish Institute of Chartered Accountants recently announced the institute’s own critique of the Act noting that the wording is getting more and more different from the EU Directive each day. In this regard the institute expressed concern the Spanish Draft Act has defined Public Interest Entities (EIP) too broadly. For example, the Directive imposes a 10 years term limit for audit firms appointed to audit an EIP, and a 1 to 9 years term for the all other entities. The Institute pointed out that if the vast majority of entities are considered EIPs, the Spanish Act largely erases this distinction. Moreover, the Institute criticized the fact that the Act eliminates the “information stage envisaged for disciplinary proceedings before the ICAC.” This stage currently allows some public bodies such as the State Attorneys, the Court of Auditors, Scholars or the General Intervention Board of the State Administration (IGAE) to give their opinion on a particular disciplinary proceeding. Many consider this public input on certain cases very useful.
On the 24 April 2015 the term for partial amendments was finished. During this parliamentary stage EY succeeded in securing permission to continue auditing several companies including Telefónica or Iberdrola for five more years. In addition, the government will delay the “rotation.” The act envisages that those companies which have not changed audit firms 20 years or more will have to change auditors by 2020; and those which have had the same audit firms more than 10 years but less than 20 years must change auditors in 2023.
The act will soon be debated by the Economy Commission and by the parliamentary Senate.