The accounting watchdog in Britain kicked off a public consultation yesterday to apply a sweeping EU reform of company accounting from next June.
The EU law followed fury that accountants gave banks a clean bill of health just months before some had to be rescued by taxpayers in the 2007 to 2009 crisis.
The EU rules will mean that 50 accounting firms will come under the supervision of the Financial Reporting Council (FRC). The watchdog inspects the reports of the 10 biggest accounting firms, a sector dominated by the “Big Four, PwC, EY, KPMG, and Deloitte.
The EU rules will require firms to change their auditor at least every 20 years to avoid “cosy” relationships that could blunt scepticism.
“The most instant change is that things we have developed as best practice will be a matter of legal requirement, such as re-tendering of auditors,” FRC executive director of codes and standards, Melanie McLarens said.
Britain already advises that firms change accountants every decade, but so far the changes at banks have been among the Big Four auditors even though lawmakers want to see more competition in the sector.
“There is no indication that those outside the Big Four are picking up audits in connection with the FTSE350 companies,” Ms McLaren said.
Some firms still have not assessed the full implications of a law that is only months away, said Hywel Ball, EY’s UK head of audit.
“Many entities, ranging from companies to financial institutions, will need to think about how and where they are going to find the non-executive directors to take up these roles across an increasing number of audit committees,” Mr Ball added.
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