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The proposals are understood to be complex and contain a detailed set of provisions that may impact widely on Public Interest Entities (PIEs) and Small and Medium-sized Entities (SMEs), stock markets, audit firms, different segments of the audit market, accountancy bodies and the whole future shape of the accountancy profession. Consequently, looking forward, FEE can only make detailed comments on such proposals once a thorough analysis has been undertaken. In order to understand all the legal implications and long-term practical consequences however, there are important matters which FEE considers must be addressed at this early stage.
FEE acknowledges the need to continue modernising the current audit model and advancing audit policy. Proposed legislation that would strengthen the role of the audit and of the profession would be strongly supported by FEE. It is therefore disappointing that the media has primarily focused on certain provisions relating to audit market structure and therefore FEE warns that the debate should not be limited to the market alone. The proposals as reported appear to be overly prescriptive, and in some instances potentially damaging, and would imply a significant increase in administrative burden and cost, both on businesses and audit firms, without any significant corresponding benefit accruing.
The risk is high that, rather than helping to meet the stated European Commission’s goals, certain proposals would turn out to be counterproductive, create additional barriers for access to the PIE sector and, in some instances, are likely to damage audit quality. This would not serve the public interest at a time where growth, innovation and job creation should be fostered. The global implications of such legislation would also need to be carefully analysed.
FEE trusts that the democratic legislative process that will start soon within the European Parliament and EU Member States will provide an opportunity to rebalance the Commission proposals, so that the adopted legislation promotes the supply of high quality audit services, facilitates the development of a vibrant market, and supports an independent and sustainable audit profession.