The audit commission ‘s recommendation for the assignment of an hearer should be discussed at the general meeting of stockholders. The audit commission ‘s independency and proficient competency should be reinforced: at least two of its members must be independent and at least one should hold cognition of audit.
Hearers will be prohibited from supplying non-audit services to scrutinize clients. The proviso of non-audit services to non-audit clients is allowed.
Large audit houses will be required to divide their audit activities into pure audit houses i.e. a complete prohibition on the proviso of non-audit services by the big audit houses.
EU-level cooperation by the European Securities and Markets Authority ( ESMA ) .
National audit supervisory governments would be strengthened. The authorization, powers and independency demands for audit supervisors would be established at EU degree, but supervising would be carried out nationally.
European enfranchisement of audit houses recognizing their aptitude to execute high quality audits of listed companies. The certifications would be issued by ESMA.
Regular duologue will be held between hearers, audit commissions and supervisors.
Common acknowledgment of statutory hearers approved in Member States to guarantee cross-border mobility of hearers.
The content of the audit study will be expanded to supply more information to all stakeholders.
An extra more elaborate audit study for the audit entity itself which will supply elaborate information on the audit carried out to the audit commission and direction. ”
KPMG ‘s reaction
“ The heavy manus expanse has drawn unfavorable judgment from the taking concern groups. ”The Big Four is seeking to soften the regulations, but on the other manus, the little hearer houses are supportive of the proposed new statute law.
KPMG reacted positively on some of the new proposals to better audit relevancy and quality, the strengthening of the function of the audit commission and a more structured attack to communications with supervisory organic structures and regulators. However, they stated: “ Audit quality is dential best provided by multidisciplinary houses. Our capableness to supply quality audits will be diminished if our hearers are separated from broad runing consultative expertness including, specifically, hazard direction in the fiscal sector. The sensed deficiency of independency of the auditing comptroller is, in our sentiment, more the consequence of the current perceptual experience in society of comptrollers instead than existent facts. ”
Their reaction on the restrictions on the proviso of consultative service: “ We have already observed that many organisations find their ain appropriate balance between the audit and the reception of indispensable advice and actively pull off that relationship. ”They think that a full halt on consultative service will take to increased costs for clients. “ It is clear that the rift in assurance between the comptroller and society still remains. We will hence hold to look for solutions to alter this social perceptual experience.
We should, nevertheless, stress the importance of the Netherlands staying connected with the international regulations and ordinances, in order to keep a ‘level playing field ‘ for Dutch concerns. ”
At this minute the statute law is still being discussed and many research workers are printing research studies about the influences. In September the UK MEP on Legal Affairs Committee, Sajjad Karim, came up with some interesting amendments which dilute the reforms.
“ takes out mentions to the function of hearers in the fiscal crisis
removes a 10 % bound on fees from related fiscal audit services
aligns the give voicing around non-audit services and a figure of audit procedural countries with international counsel
deletes the proposal to hold audit-only houses at the largest terminal of the market
and extends the proposed maximal term for audit battles for public involvement entities from 6 old ages to 25. ”
Chiefly, the cardinal construct in this reform it the fact that the Big Four is ruling the audit market. That means for KPMG, and the other three companies, that they will confront a lessening in their gross and net income. For KPMG in peculiar, the separation of the audit and non-audit services will hold big impact, because we see that they are advancing their consultative service on their web site.
In short, the inquiry is: How are they traveling to reform their companies to cut down the negative influences?