The Federation of European Accountants (FEE) has called for clarifications on a number of items regarding the implementation phase of the audit reform package, recently agreed upon by the European Union (EU) co-legislators.
In a letter submitted to European Commissioner Michel Barnier, the FEE said there is a need to show how the 70% cap on fees earned for non-audit services rendered to audit clients (in article 9) will be calculated, as according to FEE it is currently open to interpretation.
The FEE also stated that article 10 of the regulation on the prohibition of the provision of non-audit services needs to define parts of its terminology, such as "any part in management or decision making’, as practitioners need to know exactly the definition and scope of prohibited non-audit services.
It also noted that some parts of the regulation, such as those about mandatory audit rotation, will have cross border impacts that need to be explained, and that clarification is needed over the adoption of International Standards of Auditing (ISA).
Finally the FEE called for clarification on the timings of the reform. For example it asked what the various transitional periods on mandatory audit rotation would be and the timing of the phased application of certain provisions.
Overall the FEE said it was pleased with the compromises reached on audit reform, but warned the answers to the clarifications given "may significantly impact the application of the new requirements in practise."
The EU audit reform appears to be reaching its final stages, after a qualified majority of the Committee of Permanent Representatives (COREPER) voted it through recently.
According to the COREPER, the approved package allowed reaching a first reading agreement, after the formal voting in the European Parliament (EP) and later in the EU Council.
The vote in the plenary session of the EP could take place in April, after which the EU Council can approve the audit reform package without any further debate.
Any of the EU Council formations, not only the Competiveness one, can approve it. Both the plenary vote in the EP and the approval in the EU Council will put an end to the EU legislative process.