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FRC respondes to EC audit reform plans

10 Dec 10

Watchdog bites back on non-audit services ban and mandatory joint audits

The Financial Reporting Council (FRC) has rejected several of the more far-reaching proposals set out by European Commission’s Green Paper consultation, Audit Policy: Lessons from the Crisis. In its response to the consultation, the body dismisses the idea of a wholesale ban of non-audit services to audit clients, the forcible creation of audit-only firms and the mandatory use of joint audit.

However, it supported several of the other suggested measures, including those tackling the risks associated with market concentration, improving transparency and moving towards the establishment of a European Audit Agency. It also suggested improved engagement between audit committees and investors would play a key role in enhancing audit quality.

Stephen Haddrill, chief executive of the Financial Reporting Council, said: “The FRC’s overall objective is to preserve and enhance audit quality which, in turn, helps investors to make sound judgements and supports efficient capital markets.

“Our dialogue with policymakers in Brussels and other EU member states has shown how important it is for a more effective system of international co-operation to be introduced between regulators on audit quality issues and we hope this will be a key outcome of the consultation.

“The Commission now has the difficult task of building consensus across Europe, taking into account the distinctions that exist between national jurisdictions across the EU. I hope that a clear strategy will emerge around which agreement can be forged that will both enhance audit quality and promote more competition in the marketplace.”

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