26 May 2015

FEE: Implementation of the audit reform and cross border issues

The regulation includes various member state options, which give flexibility to individual EU member states for instance regarding the duration of the audit engagement, the list of prohibited non-audit services and the level of the cap on the provision of non-audit services compared to audit services provided.

FEE recognizes the rights of member states to exercise these various options where national circumstances have to be taken into account. However, FEE is concerned about the unintended impact that the resulting divergence in national legislations will undoubtedly have on EU businesses operating beyond their national borders. It is not clear whether national rules resulting from the implementation of, for instance prohibited non-audit services, apply not only to an individual Public Interest Entity (PIE), but, where applicable, also to its parent undertaking in another member state, as well as to its controlled undertakings within other member states. As far as mandatory rotation is concerned, what if a group of companies based in one member state has PIE subsidiaries in other member states that have set different rotation rules?

Businesses in the EU would potentially face an additional burden in having to coordinate different auditor rotation periods, different lists of prohibited non-audit services and different caps for the provision of allowed non-audit services. A complex EU regulatory environment translates into additional costs and inefficiencies for EU businesses.

Full letter

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