MEP waters down audit proposals

A draft report on proposed regulation for the audit of public-interest companies has watered down earlier suggestions which included the prohibition of non-audit services by the statutory auditor.

The amendments have also done away with submissions to encourage the use of joint audits for public-interest entities to reinforce professional scepticism and improve audit quality.

The report, by UK MEP Sajjad Karim, rapporteur for the European Parliament's legal affairs committee, has also taken out references to the role of auditors during the financial crisis and additionally removed a 10% limit on fees from related financial audit services.

The proposal to have audit-only firms service the largest end of the market has also been removed entirely.

And Karim has proposed that the maximum term for audit engagements for public interest entities is up from six years, to 25 years.

Other changes have seen Karim impose stricter considerations in relation to the acceptance of gifts by the statutory auditor from an audited entity - new wording suggests an outright prohibition on hospitality or 'similar' favours from an audited entity, 'unless an objective, reasonable and informed third party would consider their value as trivial or inconsequential.'

Initial submissions to net other financial institutions - such as investment firms, payment institutions and undertakings for collective investments in transferable securities (UCITS), which also fall in the 'shadow bank' grouping of non-bank lenders - as public-interest entities, has also been deleted.

The report will formally be presented in mid-September before MEPs.

Penny Sukhraj |Content editor, Accountancy - (up to 2016)

Penny Sukhraj, former content editor and writer for Accountancy and Accountancy Live, responsible for commissioning and editing news...

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