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A draft regulation, seen by the Financial Times, aims to transform the accounting sector in the wake of the financial crisis and restore “trust” in financial reporting. It has the backing of Michel Barnier, internal market commissioner, whose officials have decided the audit world is in the grip of an oligopoly.
Under the plans, which are to be unveiled in November, companies with balance sheets greater than €1 billion would be forced to hire two auditors to conduct a “joint audit” of their books, including at least one firm outside the Big Four of Deloitte, PwC, Ernst & Young, and KPMG.
Auditors will also be outlawed from working for a big company for more than nine years – a policy of “mandatory rotation” that Mr Barnier thinks will bolster independence and stimulate competition. Some big multinationals have had the same auditor for more than a century.
Non-audit work is described by the Commission as “a source of conflict of interest”. The draft says: “Audit firms of significant dimension should ... not be allowed to undertake other services unconnected to their statutory audit function such as consultancy and advisory services”.
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