EuropeanIssuers' position paper on the amendments in the Legal Affairs Committee
21 February 2013
In preparation for the discussion on compromise amendments in the European Parliament's Legal Affairs Committee, EuropeanIssuers shares the views that represent interest of European quoted companies on the amendments tabled in JURI Committee on the reform of Statutory Audit.
EuropeanIssuers is concerned that the audit market reform may add considerable costs to some 12,000 publicly quoted companies in Europe, on whom the European economy relies for future growth. EuropeanIssuers maintains that there is an undue spill-over of regulation aimed at the financial industry and the banking sector to the end users of capital markets, which are listed companies that produce goods and services for the real economy.
EuropeanIssuers' key concerns are:
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mandatory rotation of firms, the excessive reduction of the maximum duration of the audit engagement, and the introduction of a cooling-off period of four years would excessively constrain the selection of statutory auditors for large companies which already have a limited audit services offering;
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large audit firms should not be prohibited from providing non-audit services as this could lead to loss of quality of services provided, reduced competition and an increase of costs;
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the ceiling of 10 per cent of the statutory audit fees for the provision of certain related financial audit related services is problematic and the definitions should be changed;
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independence rules applicable to certain services should take into account the role of the audit committee and the time constraints of corporate financial transactions;
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the change in certain provisions relating to the audit committee (Articles 31 and 34 of the Regulation) would be contrary to the allocation of competences between the board and the senior management in company law;
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potential excessive specialisation of committee members would contradict the principles of collegiality and collective responsibility of the board;
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involving the statutory auditor in assessing the company’s internal control led to significantly increased costs for US companies under Sarbanes-Oxley – Europe should not make the same mistakes;
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the role of the auditor should not be extended to functions under the competence of the company and/or other third parties;
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granting powers to ESMA in the field of audit supervision – EuropeanIssuers believes that it would be more appropriate to confer them to EGAOB [European Group of the Auditors' Oversight Bodies];
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lack of amendment to the Regulation ensuring that the legislation follows “Think Small First” principle, whereby EU small and mid-cap quoted companies (which EuropeanIssuers defines as those under €1 billion market capitalisation) should not be subject to the legislation in the first two years, until a review has been carried out of the effects of the proposals on the largest companies.
Press release
Position paper
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