In part five of the EU audit reform series, David Young, senior adviser at Independent Audit, considers the cost implications and compliance issues for listed companies as new powers for audit committees come into force under the EU Audit Regulations and Directive (ARD)
The European Audit Reform legislation passed in 2014 was a multi-pronged attempt to reform the audit process and market. Previous articles in this series have dealt with the supply side – what services auditors could provide to companies and how audits are regulated. This article deals with how the demand side will be reformed, primarily by reinforcing the role of audit committees across Europe.
These provisions have, so far, received relatively little attention in the UK, mainly because audit committees comprising non-executive directors have been a pillar of corporate governance for many years, since being recommended by the Cadbury Report in 1992. By contrast, EU rules have only required an audit committee for listed entities since 2006 and then with a membership and terms of reference less prescriptive than the UK standard.
