The UK MEP leading the European Commission's audit reform plans, Sajjad Karim, has called for the investor community to become more involved in the audit process.
'By combining greater information and availability of insight into the audit market with a reinforced opportunity to engage, I also expect to see a much stronger attitude of involvement from shareholders and investors when it comes to a company's auditor engagement, as they find themselves much better placed to critically assess and comment on what they want to see from their auditors,' Karim told a round table gathering meeting in Brussels this week to discuss the future of the audit market.
Investors however argued that the audit system as it stands lacks transparency and that they currently felt excluded from the audit process.
There was agreement all round - from representatives of the audit profession, investors, shareholders, business, the European Parliament, the European Commission, the International Auditing and Assurance Standards Board (IAASB) and the European Securities and Markets Authority - that this needs to improve, with better auditor communication, auditor reporting, and a stronger role for the audit committee.
The gathering gave a fresh airing to debate around reforming the audit market and follows several exchanges between Karim, investors and audit firms after the MEP watered down strong recommendations calling for joint audits and shorter auditor tenure, along with other regulatory measures to improve choice in the market and encourage participation from audit firms outside the Big Four.
The issue of joint audit - deleted in MEP Karim's draft report - was addressed with representatives of mid-tier firms arguing in favour of the Commission's proposal to incentivise the system, calling for strong regulatory measures. But mandatory joint audits were opposed by business representatives, who warned against increasing costs to areas that are not significant to the audit user, as it draws resources away from the key focus points.
Sue Almond, technical director at ACCA said that although several areas of difference remained, 'it was interesting to see a number of areas of consensus, for example, in the critical role of the audit committee in auditor appointment and independence, and in the need for more informative and transparent auditor reporting.
'We look forward to working with MEP Karim and the broad range of stakeholders as the debate enters the key negotiating stage with a view to achieving change that will genuinely contribute to audit quality and enhance public confidence in audit,' she said.
