The European Group of International Accounting Networks and Associations (EGIAN) identified the principles which should underpin the change programme and the key actions to implement the proposed reform programme in its position paper. EGIAN supports:
 

• Disclosure of key issues discussed by the audit committee and management with the auditors. This should be provided in the audit committee’s report in the case of large listed companies and the auditors should indicate whether they concur with these disclosures.

• Review of narrative reporting and related audit scope with particular reference to risk-related issues. A review should be undertaken, with significant investor involvement, of the narrative reporting requirements and, related to these, the scope of the audit of large listed companies.

• Placing a limit on the market share of dominant audit firms. Regulators should act, in conjunction with investors and other market participants in the individual Member States as appropriate, to reduce progressively the concentration in the audit market for large listed companies.

• Regular and fair tendering. This should be phased in with respect to the audits of large listed companies.

• Introduction of audit consortia or joint audits. Regulators should act, in conjunction with investors and other market participants in the Member States as appropriate, to increase progressively the number of large listed companies that appoint audit consortia or joint auditors, which should include at least one non-dominant firm in each instance.

• Curbing institutional bias in favour of the Big 4. Measures to be introduced should include an end to restrictive covenants in loan agreements and similar clauses requiring the appointment of specific auditors.

• Rigorous examination at EU or Member State level of proposed acquisitions that include firms active in the large listed audit market. Proposed transactions should be examined by competition authorities not just in the context of the impact on concentration at the EU or Member State level, but also with regard to the potential negative impact globally on an audit network being able to continue credibly in the large listed audit market.

• Focusing auditor independence requirements on the IFAC/IESBA Code of Ethics. The IFAC/IESBA Code of Ethics is widely respected as a means of addressing conflicts of interest and independence issues in the conduct of audits, and is recognised as being “fit for purpose”.

• Support for introduction of ISAs. Clarified ISAs, along with ISQC1, which have been developed after extensive due process and are widely respected, should be introduced across the EU as they would promote harmonisation of quality auditing practices.

• Support for development of a European passport for audit firms. To promote the creation of a Single Market in audit services in the EU, firms should be given the option to register and be regulated on an EU-wide basis, subject to their having people with the necessary understanding of the business and regulatory environment and the requisite language skills to operate effectively in their chosen Member States. Such an approach may encourage the emergence of new players as well as the coming together of firms in existing networks.

Full paper