The Council of the EU has formally adopted the legislative package for the reform of the audit market in the EU announced earlier this month, which is intended to increase competition and  transparency in the audit market.

This opens the way for the Competition Commission, which has now been taken over by the Competition and Markets Authority (CMA),  to review its package of remedies to increase competition within the provision of statutory audit services to FTSE 350 companies in the UK. The regulator previously said it would delay this process in order to consider the implications of any new EU rules and to avoid any contradictions or duplications of EU regulation.

The Competition Commission said it anticipated further rounds of consultation on its revised orders in Q3 2014,following an expected decision at the EU level, with the new orders expected to commence in Q4 2014.

The new EU reforms include the requirement for mandatory rotation of auditors of public-interest entities (PIEs) after a period of 10 years, with a maximum auditor term of 20 years where a public tendering is conducted and up to 24 years in case of a joint audit. The rules also prohibit the use of restrictive clauses in contracts which limit a company’s choice of auditor in order to promote market diversity.

Auditors will not be allowed to provide a number of non-audit services, such as tax, consultancy and advisory services to audit clients. Audit firms which supply non-audit services (other than those prohibited) to clients for three or more years, the total fees for such services will be limited to no more than 70% of the average of the fees paid in the last three years.

Supervision of the new regime will be carried out within the framework of a Committee of European Auditing Oversight Bodies (CEAOB).