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The measure was prompted by the 2007-09 financial crisis during which taxpayers had to rescue banks that had been given a clean bill of health by auditors months earlier. It aims to make accountants challenge more of what they are told by clients and to end cosy relationships that have lasted decades in some cases.
Requiring periodic change in auditor is also seen as a way of boosting competition in a sector dominated by the Big Four accounting firms: PwC, Deloitte, KPMG and EY. EU states and the European Parliament have joint say and had been due to meet on Thursday, raising hopes of a final deal. But EU sources said that as a result of the disputes over issues such as banning accountancy firms from giving tax advice to companies whose books they were already auditing, a new date for negotiations is now unlikely before early 2014.
Sajjad Karim, the British centre-right lawmaker who is leading negotiations for the assembly, scrapped Thursday's meeting, because Member States "failed" to come up with new compromises. "The parliament has made a considerable effort to find a way forward and presented a workable compromise package", Karim said in a statement.
Representatives of EU states met on Wednesday and a majority of EU states backed rotation of auditors at least once a decade, with the option of extending this by another 10 years under certain conditions - in line with what parliament is offering. But the meeting gave the bloc's presidency Lithuania only limited room to negotiate on other elements of the draft law where there are still deep divisions, such as over who should supervise accountants. The draft law could end up in limbo for months if no deal is reached by March or April as the European Parliament goes to the polls in May.