The reason for a re-consultation, albeit on a small scale, was the release of final reforms by the European Parliament and the Council, which has meant that the UK competition authority has had to revisit a number of its proposals to avoid conflict with EU regulations.

There are less than two years until the new EU rules have to be implemented under Directive 2014/56/EU (the Directive) and Regulation (EU) No 537/2014, which enters statutory regulations on 17 June 2016.

The CMA has confirmed that it will go ahead with plans to introduce mandatory use of competitive tender processes and audit committee responsibilities subject to final feedback from stakeholders.

The consultation document outlines robust new duties for audit committees (AC), including clarity on AC responsibilities when an audit has not been retendered for five years, and sets out a timetable for conforming with tendering in light of the new EU rules which could conflict timewise with some of the UK rules.

However, the EU watered down its initial eight-year audit tenure plan, allowing for a 20-year audit contract in exceptional circumstances, as long as the audit business has been retendered over the period. Although the rules require a 10-year cycle member states can opt out using a derogation.

The CMA has said that ‘the UK government is minded, subject to consultation, to take advantage of this derogation and that this is consistent with the government’s negotiating position during the negotiation of the EU audit reforms’.

The proposals include strict reporting on audit retenders, for example, ‘if a competitive tender process has not been completed for auditor appointments in relation to five consecutive financial years the audit committee must, in the audit committee report covering the fifth financial year, state the financial year in which the FTSE 350 company intends to complete a competitive tender process and why this period is in the best interests of the members’.

However, there will be some leeway on audit tenders for companies which come up for review during the two-year period between the initial Directive and the EU Regulation coming into law in 2016 so that FTSE 350 entities are not forced to retender immediately. This will be written into the rules although the CMA's first attempt at explaining the proposals is confusing.

Tony Bromell, ICAEW head of integrity & markets, said: ‘The CMA’s more detailed explanatory notes to help clarify the competitive tendering requirements and audit committee responsibilities are still too complex.

‘Further clarification will be needed to help companies understand when they need to take action.’

One of the key measures, adopted by the EU, goes further than the original CMA proposals, namely both the Directive and the Regulation prohibit contractual clauses restricting the choice of statutory auditor to certain categories or lists in all third party contracts.

As result, the CMA has signalled its intention to include these wider measures as it ‘considers that these measures are more extensive than its proposed remedy on auditor clauses in loan agreements, and therefore sufficiently address concerns identified in its Report in this regard.

depending on the outcome of the consultation feedback, the CMA ‘may also make modifications to the proposed Order as a result of any representations'

‘In light of this “material change of circumstances” or “special reason”, the CMA is not minded to pursue its remedy on auditor provisions in loan agreements.

The intention is to introduce the new measures this autumn and they are likely to become statutory requirement by year end 2014.

However, depending on the outcome of the consultation feedback, the CMA ‘may also make modifications to the proposed Order as a result of any representations.

‘If the CMA considers that any representation necessitates any material change to the proposed Order, the CMA will give notice of the proposed modifications.’

The CMA consultation closes on 24 August 2014 at 5pm.

The consultation document, including explanatory notes on proposed tenders and audit committee responsibilities are available here https://assets.digital.cabinet-office.gov.uk/media/53d0f44140f0b60b9c000004/Explanatory_notes_Tenders___AC_responsibilities_Order-Formal_Consultation.pdf

The Notice of intention to make an Order under section 165 of and Schedule 10 to the Enterprise Act 2002 and public consultation on the proposed Order is available here https://assets.digital.cabinet-office.gov.uk/media/53d0f40be5274a642b000001/Notice-Formal_Consultation.pdf

Representations should be sent to [email protected]