UK business slams Barnier audit reforms
A number of business groups, including the CBI, yesterday slammed Michel Barnier’s proposals to shake up the audit market, saying they were “the latest in a long line of unnecessary distractions coming out of Brussels that would only serve to add to business costs”.
Matthew Fell, director for competitive markets at the CBI, the employers’ body, said: “The Commission’s own impact analysis estimates that this could cost up to €150,000 (£128,400) a year in extra compliance costs for each large company.
“We’re particularly concerned that the prohibition of non-audit services and the requirement for audit-only firms will threaten the breadth of expertise and quality of services currently available to businesses, without boosting competition.”
The Big Four accountancy groups, PwC, Deloitte, Ernst & Young and KPMG, have been fiercely resisting the proposals being put forward by the EU’s internal market commissioner Barnier, especially the requirement to split member firms into separate audit and consulting businesses.
Pauline Wallace, PwC’s head of public policy and regulatory affairs, said: “Market structure issues should be a matter for the national competition authorities, not for the European authorities. They are very dependent on the nature of the individual market and this requires detailed analysis of the evidence, which is what is happening right now in the UK with the Competition Commission inquiry.”
Key elements of Barnier’s proposals include requiring a listed company, for which an audit is compulsory, to switch or rotate to another auditor after six years. If the audit is done jointly with another auditor — a step seen by Brussels as a way to improve quality — mandates can stretch to nine years before compulsory switching.
The pulling back from an insistence on big companies being forced to have joint auditors, a practice still undertaken in France, was the one relief for the Big Four, who have been lobbying strongly against the idea, arguing that it would increase the cost of auditing to companies while simultaneously lowering the quality.
BDO was especially disappointed by this decision. xxxx
But Barnier’s proposals were welcomed by Mazar’s, another firm outside the Big Four. They were described by xxxxx as “a good starting point, one worth building on.” He said he saw no reason why firms outside the Big Four shouldn’t be working on 20-30 per cent of the audits of FTSE100 groups (compared to next to none now) in the next few years, if the proposals are implemented.
“Market structure issues should be a matter for the national competition authorities.”
Pauline Wallace, PwC head of public policy
“The latest in a long line of unnecessary distractions coming out of Brussels.”
Mathew Fell, director for competitive markets, CBI
“The remaining proposals appear to be worse for the market than no proposals at all.”
James Roberts, senior BDO audit partner
“These proposals represent a good starting point, worth building on.”
David Herbinet, Mazars managing partner
“We are pleased that the proposals reflect our previous opposition to mandatory joint audits.”
Andy Halford, chairman, the Hundred Group