The European Parliament’s legal affairs
committee has adopted a final version of the European Commission’s
Green Paper on audit, which will be passed back to the EC for final
release in November.

The main recommendation in the paper is
a demand that public procurement should aim to use firms other
than the Big Four and that public bodies should set a benchmark
percentage for the use of non-Big Four firms.

The legal committee also suggested fair access
to the tendering procedure by ensuring that at least two non-Big
Four firms take part in the re-tendering process.

One of the recommendations to help remove
obstacles in the market was to allow the public sector, including
the European Institutions, to better judge the quality of audit
services provided by audit firms irrespective of size.

The committee also suggested reviewing audit
committee practices within private sector companies and for the EC
to carry out an impact assessment on the rotation of auditors and
voluntary joint audits.

Calls on the EC to develop a pan-European
liability regime for the auditing profession were also
endorsed.

It was also suggested that Big Four
restrictive lending clauses should be outlawed – a move that is
backed by the audit profession – while Big Four takeovers of
non-Big Four firms should be more heavily scrutinised by
competition authorities.

Conservative party MEP Syed Kamall, who sat on
the legal affairs committee, said that the agreed upon version of
the paper sends the EC a clear message that there is a need to
maintain flexibility in the auditing industry in Europe.

“We need to strike the right balance when
reforming the auditing industry.  The EC should explore all
the options that are out there, not sign up to mandatory audit
rotation or joint audits now,” he said.

Kamall’s policy adviser told the
International Accounting Bulletin the lead MEP
within the legal affairs committee, Spanish socialist Antonio Masip
Hidalgo, suggested that auditor rotation should be mandatory every
eight years and auditors should not be allowed to carry out the
majority of the non-audit services.

However, Masip Hidalgo’s suggestion was
scrapped from the adopted document and voluntary joint audit was
added.