A leading MEP has criticised what she called an “ostrich mind-set” of the ‘Big Four’ accounting firms in response to European Commission proposals for audit reform.
Dr Kay Swinburne was speaking at an event organised by ICAS,
Scottish Financial Enterprise and the Investor Relations Society.
Swinburne said that she had asked the Big Four to come to
her with proposals for improving the audit market, but that 18 months after
these were due, she still had not received them.
She said that the audit market could be improved, and urged
audience members to engage with the European Parliament as it prepares its own
draft legislation, following the Green Paper of Internal Market and Competition
Commissioner, Michel Barnier.
Barnier’s Green Paper on audit market reform called for the
breaking up of the Big Four into audit services and non-audit services.
A Conservative MEP and member of the EU Economic and
Monetary Affairs committee, Swinburne is one of the rapporteurs preparing the
EU Parliament’s proposals.
She said that Barnier considered audit to be ‘the dog that
didn’t bark’ in respect of the financial crisis; that it had not sounded the
She said that the Parliament was “not going to back down” on
audit reform, and that Barnier was “not likely to get what he wants”, but
stressed the importance of input from audit professionals about alternatives to
Commission officials who worked on proposals such as those
for reform of the audit market may have done so for years, and that those who
opposed the proposals needed to have alternate solutions, and not simply say
“it doesn’t work”.
In a wide-ranging discussion, Swinburne mentioned several
times the importance of engagement with the EU legislative process, saying that
the UK had not always been good at this.
She said that she was currently dealing with 56 pieces of
legislation or directives in the economic area, and that EU had the most
interactive legislative process she had ever come across.
With proper engagement there was scope for significant
amendments to be made between the first draft of legislation and the final
version, Swinburne said.
The UK was “incredibly bad at doing it properly,” Swinburne
She said that legislation which was coming from Brussels in
relation to corporate governance would have a big impact on the UK.
Many people felt that because the UK already had safeguards
in place that this area “had been dealt with”, but that lesson which had been
learned in the UK had yet to be adopted across Europe.
‘Comply or explain’, for instance, doesn’t work in Europe, Swinburne
said. “There is no concept that this can happen.”
The mind-set in Europe was that guidelines must be in
legislation to be followed.
There was a “worrying” trend toward regulation, rather than
directives, in the EU, Swinburne said, and a perception that the UK does not
Notes to Editorsview
ICAS – the professional body of Chartered Accountants (CAs) – is a regulator, educator and influencer. We act as a thought leader and voice of our professional business community. The CA qualification is unique to ICAS in the UK. It is recognised and respected internationally. We have more than 21,000 members and students across the UK and in more than 100 countries around the world. We provide support, advice and services to our CAs throughout their professional lives. Our members are business advisors, business leaders and entrepreneurs. They play leading roles in 80% of the FTSE 100 companies. Half our members are based in Scotland. The other half work in England and around the globe. ICAS is the world’s first professional body of chartered accountants, founded in 1854. We are a member of The Global Accounting Alliance (GAA) – an alliance of the world’s leading professional accountancy bodies, which was formed in 2005. The GAA is intended to promote quality services, share information and collaborate on important international issues. It works with national regulators, governments and stakeholders, through member-body collaboration, articulation of consensus views, and working in collaboration, where possible with other international bodies, especially IFAC.