The EU could be less than a month away from a deal forcing the bloc’s listed companies to change their accountant every decade, a senior EU lawmaker said.
Sajjad Karim, a British centre-right member of the European Parliament, is leading a team of lawmakers looking to bridge a gap with the bloc’s states over how often firms must switch their book-keepers.
The reform aims to make auditors more sceptical about what managers at client firms tell them.
The accounting sector is dominated by the “Big Four” of PricewaterhouseCoopers, KPMG, Deloitte and EY, who have been criticised for giving banks a clean bill of health just before many had to be rescued by taxpayers in the 2007-09 financial crisis.
Mr Karim is proposing a switch every decade, with the option of sticking with the same accountant for another 10 years under certain conditions.
An extension would be agreed if two accountancy firms are hired, that book- keeping work is put out to public tender or the firm’s audit committee endorses an extension.
This compares with the European Parliament’s initial position of a 25-year maximum period before mandatory switching, and moves lawmakers largely in line with what is wanted by many member states, who have joint say on the draft EU law.
The draft law has been bogged down for months, but Lithuania — holder of the EU presidency — secured a breakthrough among states to open talks with the parliament.
Mr Karim said a deal on which non-audit services should be restricted was being hammered out.
A battle also looms over what role, if any, the European Securities and Markets Authority, and EU regulator, should play in aiding national supervisors of accountants.
The EU’s executive European Commission has estimated it would cost a big company €400,000 to put its audit work out to tender, and cost between €5m and €7m for a firm to tender for the work.