Industry and business ministers have given a cool reception to European Commission attempts to impose obligations on companies to rotate their auditors.
At a meeting of the EU’s competitiveness council in Brussels yesterday (29 May), ministers cast doubt on the Commission’s proposal to revise the audit directive. The proposal, put forward at the end of 2011, would require companies with public interest implications, such as financial institutions, to change auditors every six years.
The EU would also draw up a blacklist of non-audit services that auditors would be forbidden to provide.
Most ministers said that while they could support a blacklist, the Commission’s proposal would exclude too many services. “We agree with the principle, but the list currently drafted would prohibit almost all non-audit services,” said Stephen Green, UK minister for investment. “We need to thin out the number of measures on the list,” agreed Philipp Rösler, German economy minister.
Several ministers said they doubted that rotation would improve audit quality. The European parliament’s legal affairs committee voted last month to extend the maximum permitted period without rotation to 14 years.
Ministers were evenly split on whether the EU should give oversight of auditing to the EU’s European Securities and Markets Authority, as proposed by the Commission. Many ministers support an alternative proposal from Germany to expand the remit of the existing decentralised network of national oversight bodies. “We support the alternative light-touch approach,” said Green.
But Michel Barnier, the European commissioner for the internal market, said a centralised authority was needed. “It would be in all of our interests to save costs by pooling resources and using ESMA,” he told the ministers. “I am happy to work on the contents of the blacklist,” he said.
Ministers also discussed state aid reforms and recommendations for EU copyright law. The council will today discuss space industrial policy and the space surveillance programme.
On Tuesday (28 May) the Commission released its annual report on EU competition policy.
It showed the Commission’s action in 2012 focused on financial services, key network industries such as energy, telecoms and postal services, and knowledge-intensive markets such as smartphones, e-books and pharmaceuticals.