The European Parliament Impact Assessment Unit
(IA) has said the European Commission’s (EC) audit reform proposals
lack sufficient drivers and evidence for any proposed policy
change.

The IA said the link between an alleged
general problem of deficiencies in audit quality across Europe (EU)
and worldwide and the financial crisis is “causal and unclear”.

The unit carried out the assessment on behalf
of the EU Parliaments Committee on Legal Affairs (JURI) and
plans to discuss its findings and other matters relating to the EC
proposals at a JURI meeting later today. IA said it may also
discuss the findings with the EC at a later date if it needs
further clarification.

In its report, Statutory audits of public
accounts and of public-interest entities, which has been seen
by The Accountant, the IA said, from a methodological
point of view and without making judgments about the
appropriateness of the proposals, the EC could be expected to
provide more justification as to why some of the policy options
were selected.

“(…)given both the ambition of the proposals
and the widespread criticism from stakeholders, including detailed
claims these policies may not be helpful in solving the problems
and could even have the opposite effect,” the IA wrote in its
report.

The unit also recommended “better” analysis of
some of the experiences of member states in relation to mandatory
audit firm rotation, such as in Italy or joint audits in France, is
carried out.

It also called for more analysis on each
individual option not only in “isolation, but also in relation to
all other measures in the proposed policy package” as a way to
provide a “more comprehensive analysis of the costs and benefits
both for the individual options and the aggregate package” and to
“discuss more extensively stakeholders’ views” both in favour and
against the IA’s preferred options.

The IA said the EC may also have to further
explain its reasons for excluding certain “milder” options from the
propsed reform.

The unit clarified it did not deal with the
substance of the proposals but analysed whether the impact
assessment provided by the EC will help JURI’s consideration of the
proposals.

In response to the report, Institute of
Chartered Accountants in England and Wales’s chief executive
Michael Izza said it is clear the EU Parliament has “major concerns
about the evidence base for the Commission’s reform proposals and
raises a number of questions about how these proposals should now
be taken forward”.

“It is important that both the Parliament and
the Council reflect on this report and only take forward specific
proposals where the evidence justifies the need for reform,” Izza
warned.