Big Four lobbyists have come under fire at the first public hearing of EU Parliament legal affairs committee on the EC’s audit reform.
Although the aim of the hearing was to discuss the EC proposals, such as mandatory rotation and audit-only firms, plenty of scorn was directed at the intense lobbying efforts of the four largest firms, PwC, Deloitte, KPMG and Ernst & Young.
EC deputy head of auditing unit Arvind Wadhera said Big Four lobbying has been excessive and is “becoming counterproductive”.
Another committee member said: “The message has to go out to the Big Four that we can not let this oligopoly to continue.”
The European Group of International Accounting Networks and Associations (EGIAN), which represents the interest of mid-tier firms, also chimed into the lobbying debate.
EGIAN director Andrew Brown called on the EU parliament to “rise above the unacceptable lobbying by some of the larger firms”.
European MEP Sajjad Karim, who is leading the committee’s debate on audit reform, said the parliament is open to as many views but called for constructive dialogue.
“I want to assure everyone of the independence of the committee and offer a hand of co-operation to all interest groups in order to break the existing status quo, which is not an option,” Karim said.
EC proposals unpopular
Stakeholder groups and the majority of the witnesses expressed little support for the EC’s proposed measures such as mandatory audit firm rotation, pure audit firms and banning certain non-audit services.
Federation of European Accountants chairman Philip Johnson told the committee there is room for improvement of audit quality but some of the EC’s proposals are detrimental.
“Pure audit firms, mandatory rotation, restricting non-audit services will isolate EU on the global stage and reduce the level of expertise with in audit firma and make the profession less attractive,” he said.
Speaking on the behalf of investors, UK Corporate Governance and Reporting, Investment Management Association director Liz Murrall said investors are against mandatory rotation and banning non-audit services.
“We find non-audit services proposal as a step too far,” she said.
Brown said the EU parliament should consider any measures as a package.
“Single measures as they are being looked at now on their own won’t work,” he said.
Theo Siegert, managing partner of Haen Carstanjen & Söhne and member of several German audit committees said German DAX audit committee chairs are against non-audit services restrictions.
All of the witnesses called forward spoke of the importance to improve corporate governance and audit quality but not through the EC’s proposals.
Karim said the committee plans to engage further with stakeholder as it debates “the most challenging dossier of his 20 year career so far”.