Insurance Europe has published its response to a consultation by the European Commission on its proposals regarding corporate reporting and its enforcement.
EU
requirements for audit, supervision and corporate governance are
already effective and achieve the desired objectives: There is,
therefore, no urgent need to modify and extend them. Moreover,
exceptional corporate failure cases cannot be a driver for new EU
legislation.
Should any new requirements be proposed in
reaction to such cases, they must be proportionate and distinguish
between genuine public interest entities (PIEs) and other companies. It
does not seem reasonable, for example, to equate a small regionally
operating fire insurance company with an internationally operating and
listed group of companies. The current definition of PIE in the
Commission’s proposals is therefore too broad and would potentially
burden many small insurers with additional requirements without added
value.
As raised during the last EC review of the Audit
Directive, Insurance Europe has serious concerns about the impact of the
requirements for mandatory audit firm rotation and the provision of
non-audit services.
Mandatory audit firm rotation causes
complexity by forcing subsidiaries to rotate their audit firms even if
the parent company (listed in EU or outside EU) is not required to do
so. This significantly harms the unified audit process within a group,
as it clearly neglects the complexities of multinational entities which
have a multitude of domestic and foreign subsidiaries within and outside
of EU territory. Insurers therefore support the harmonisation of the
approach regarding statutory audit market regulation so that mandatory
rotation would apply from a group perspective.
The
restrictions on non-audit services in the Audit Directive create
divergences amongst EU member states, as national regulators and member
states apply the legislation differently. It also means that some tax
and valuation services cannot be provided by the same firm within a
group which results in additional costs and inefficiency. The nature of
prohibited non-audit services should, therefore, be based on the law of
the ultimate EU parent entity, and domestic law should apply across the
entire group irrespective of where any PIE subsidiaries might be located
within the EU.
Moreover, there is a conflict of objectives
between increasing requirements for audit firms regarding their
independence and the free choice of an auditor. This is especially the
case for listed insurance companies, where the market for suitable audit
firms consists of only four to six firms. If one of these is, for
example, responsible for the audit, one for tax advice and one for
valuations and transaction advice, there is little choice in the
rotation of the auditor in any case.
InsuranceEurope
© InsuranceEurope
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