Barnier gives preview of his proposal
By Sophie Mosca | Wednesday 14 September 2011
During the European Parliament’s debate on a report on audit policy (see
Europolitics 4263), on 12 September, Commissioner Michel Barnier (internal market and financial services) lifted a corner of the veil on the legislative proposal on audit policy, which the Commission plans to present by the end of November. Auditors are concerned about his apparent intention to aim to go further than Parliament’s text.
Although Barnier denies accusations of leading a “crusade against the Big Four,” he wants to put in place strict measures to end the pronounced concentration in this sector, considered “unacceptable”. To make the sector more competitive and dynamic, the Commission will take “determined action” in three core areas: guaranteeing the independence of audits; opening up the sector; and developing a more integrated market.
On the independence of audits, Barnier does not rule out a rotation of auditors during a limited period. To avoid conflicts of interest and artificially low prices on audit services, with this reduction compensated for by other services, such as consulting, he intends to go further than MEPs by banning such practices and thus certain incompatible related services. The commissioner is also exploring the feasibility and proportionality of measures to encourage the development of “pure audit firms”.
Opening up the sector will require fairer competition between operators. The commissioner recommends a ban on exclusivity clauses to the benefit of the Big Four and is considering, with fellow Commissioner Joaquin Almunia (competition), measures to boost transparency and competition among auditors. Barnier seems to be giving favourable consideration to the model of joint audits that would involve one of the Big Four and another firm, an option that has been tested fairly successfully in France (audit office).
To develop a more integrated market, Barnier defends the idea of a European passport for auditors similar to the professional card established by the directive on professional qualifications (used little in practice), which would promote greater mobility in the EU. He also suggests automatic recognition of auditing firms between member states to facilitate the possibility for all such companies to perform audits on all listed European companies, access which for now is the exclusive prerogative of the major firms.
Another lever to enhance integration on this market is the adoption of the International Standards on Auditing (ISA), currently being discussed. Supervision of the sector by national authorities should also be reinforced and closer cooperation by authorities at European level should be encouraged by the European Securities and Market Authority (ESMA), and not by a new body set up for that purpose.