EU audit proposals must not undermine audit quality
Posted, November 30, 2011 @ 13:00
As the European Commission today publishes proposals to reform the audit market in the EU today, the parliament's rapporteur (lead member) on them has said that he wants to ensure that competition is working in the auditing sector, but warns that the EU must think through any unintended consequences from its actions if it over regulates.
Syed Kamall, Conservative MEP for London, has said that he will approach the process with an 'open mind' and if investors and audit clients identify problems in the auditing sector, he will aim to address them. However, he says that he wants to hear from companies and investors on whether the auditing sector is broken and if they believe that the 'Big 4' auditing firms should be subjected to "artificially imposed" competition via structural changes.
He said: "I am starting this process with an open mind. There may be a case for tackling the dominance of the Big 4 and finding ways to improve auditing quality but I want to hear from investors and companies whether they believe that the current auditing system is broken. After all, the last directive dealing with audit has yet to be fully implemented in many member states.
"There could be significant unintended consequences if we legislate more than absolutely necessary.
"I'm also not sure that dealing with the dominance of the Big 4 audit firms in this context is the right approach. The OFT has just referred the Big 4 to the Competition Commission in the UK, making clear that competition issues should be dealt with by competition authorities. I would have expected perceived competition issues to have been dealt with by the competition directorate rather than the busy internal market directorate.
"If there are genuine problems in the audit market then we should find genuine solutions for them. However, we should avoid imposing "knee jerk" solutions or forced competition which ultimately could make the auditing market weaker."