The European Parliament’s Committee on Legal Affairs has voted to recommend the Parliament adopt a law to require audit firms to check a company’s books for no more than 14 years, with a possible extension to 25 years if certain safeguards are present. The proposal softens the original recommendation from EU Commissioner Michel Barnier, who wanted firms to remain on a given audit no more than six years.
By a vote of 15-10, the committee decided it would recommend a law to require auditors of “public interest entities,” such as banks, insurance, companies, and listed companies, to provide investors with a detailed understanding of what the auditor did and the overall assurance of the accuracy of the company’s accounts. The law would forbid companies from restricting their selection of an audit firm to Big 4 firms only, which lawmakers hope will help create more competitiveness among the leading audit networks. The proposed law also would require audit firms to follow international standards meant to head off conflicts of interest.
