Big Four hit back at EU audit reforms
ITV's CFO Ian Griffiths tells CFO World that competition and quality in UK audit market is robust
UK's largest audit firms and business lobby groups hit back at proposed reforms issued on Wednesday by the European Commission to separate audit firms to avoid perceived conflicts of interest.
The European Commission's plans have surprised the UK industry going much further than expected by threatening to break up the Big Four – KPMG, PwC, Deloitte and Ernst & Young - in sweeping reforms.
"Adding cost and complexity to business will not help European capital markets, investors and business. The Commission's focus should instead be directed to measures which reinforce trust in audited information by focusing on audit quality," said Ian Powell, chairman of PwC UK and head of the PwC region that covers the European Union.
PwC added that the Commission's own consultation process " indicated a lack of support across Europe for proposals such as audit only firms and mandatory audit firm rotation".
David Sproul, chief executive and senior partner at Deloitte, said: “Further restrictions on non-audit services, creating audit-only firms, and mandating rotation will result in unnecessary disruption and cost, and will not address the objectives of improving audit quality.
Michel Barnier, internal markets commissioner, on Wednesday issued long-awaited plans to shake up the auditing industry, proposing to separate audit activities from non-audit activities, such as tax and consulting, "to avoid all risks of conflict of interest".
EU politicians complain that auditors are too close to companies to take an independent view pointing to the fact that auditors gave banks a clean bill of health just weeks before governments had to rescue them from collapse during the financial crisis.
Last week the chief executive of the UK governance watchdog, which oversees auditing standards in the UK, criticised EU policymakers for hijacking regulation across Europe because "if we build a fortress Europe we will be doing ourselves a great disservice".
Rolf Nonnenmacher, head of KPMG's EMA region said: "Today's proposals focus on a desire to change the structure of the audit market. These issues would be best considered by the appropriate competition authorities, as is happening in the UK at present."
The UK's Competition Commission began an investigation into audit quality and competition in October which is expected to last two years.
Nonnenmacher added: "KPMG believes that the [EU] proposals miss the opportunity to put in place a meaningful framework for change, and would have no bearing on audit outcomes.
"They are also in marked contrast to the views of the majority of stakeholders, including financial institutions, investors, MEPs, business and academics."
ITV's chief financial officer Ian Griffiths told CFO World in a separate interview that he wasn't concerned by competition issues in the UK because the audit market was sufficiently competitive.
"The audit market is competitive and there is always a choice so I'm not worried about the debate. It may well be focusing on some of the wrong issues.
"It's up to corporates to stay on top of those relationships to make sure that independence is strong and make sure that the audit and non-audit fees are appropriately balanced. But I think audit committees get that and are much more aware of where the line is."
Meanwhile, the Confederation of British Industry -- which represents ome 240,000 businesses that together employ around a third of the private sector workforce -- called the EU proposals "the latest in a long line of unnecessary distractions coming out of Brussels".
Matthew Fell, CBI director for competitive markets, said that the proposals "will only serve to add to business costs at a time when the focus should be on promoting growth and job creation".
"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," Fell added.
Share:Facebook Twitter Google Plus Stumble Upon Reddit Share This Email this article
The role of the CFO and the board in strategic risk governancemore ..
Marks and Spencer releases Alan Stewart early by to help deal with £250 million hole in Tesco’s accountsmore ..
The company is being sued by Getty Images for copyright infringementmore ..
Apple failed to show that it suffered enough harm as a result of Samsung's infringementmore ..
Examining how CFOs can improve the way they report back to the boardmore ..
Litigation funding is a very useful tool for CFOs but not a panacea for all legal mattersmore ..