A wrap-up of the EC conference

It’s been a week since returning to Australia, and I’ve had time to consider further and reflect on the discussions I’d been a part of in Brussels. Here are my brief wrap-up thoughts:

Clearly, there will be change occurring with the policy settings concerning external audit in Europe – Commissioner Barnier made that clear – but what is unknown will be the extent of these changes. For each topic discussed in Brussels there were strong arguments both for and against.

The timing of these changes was set at ‘the end of the European summer’ or no later than the end of October 2011 for a proposed directive.

It seems fairly clear to me that all European countries will be heading to using and following the International Auditing Standards – a sensible outcome.

My sense on auditor independence is that there will certainly be some tightening of limitations on the type of non-audit services that auditors can provide to their clients. I don’t believe that Europe will head for a total ban on all non-audit services – but it was certainly discussed and did have some supporters.

To stimulate the audit concentration focus, suggestions on mandatory rotation of audit firms and joint audits were discussed in great detail. If these were seen to be a ‘bit heavy handed’ then regular competitive tendering may be seen as a suitable option.

The absence of an appropriate legal liability regime (liability capping) in Europe was highlighted as currently being a significant limitation in Europe.

There was much focus and discussion on the evolving role of the audit committee and recognition that it is such a critical component of corporate governance.

My suggestion to assist with appraising all of these current options is to continue to focus on the question – does this proposed change lead to an improvement in audit quality?
At the end of the day, no-one would dispute that we all are committed to the goal of improved audit quality.

Finally in Australia, we should not simply assume that changes in Europe will automatically flow to Australia – we need to consider our individual jurisdiction policy settings and regulatory framework and reach the right judgements about any proposed changes – change simply for the sake of change is not good enough.