Given that auditing is of such vital public interest and plays such a specific role in reinforcing confidence in the capital markets after the financial crisis, any proposals to reform the sector must be carefully thought through.
Clearly, this is a major issue for KPMG, the audit profession as a whole, our clients, the wider business community and many other stakeholders, not just in Europe – but globally as well.
KPMG welcomes a positive agenda for change and recognises that the status quo is not an option. That is why we strongly support measures that aim to improve the relevance and quality of audit and provide for a robust framework for auditor independence and corporate governance.
Whilst there are some aspects of the Commission’s proposals that we support, at the same time we believe many are seriously flawed and could have the unintended effect of actually harming audit quality rather than strengthening it.
As drafted, and without significant change, there is a real risk that the proposals could disrupt the audit market, resulting in a significant loss of audit quality, acting as a drag on growth and increasing costs to business.
We welcome the fact that the draft JURI report, released in September has addressed some of our concerns on the initial European Commission proposal such as the removal of the creation of audit-only firms. However we believe that some important elements are still missing from the draft JURI report such as corresponding enhancements to corporate governance, whilst others, such as the mandatory firm rotation proposal, need further debate.
Clearly, there is a continued need for wider discussion to ensure that whatever legislation emerges in relation to the audit market, it provides the right framework and model.
So we now want to take the opportunity to provide an overview of the proposals, their implications and our views on them. On these pages, we examine many of the issues and arguments surrounding audit reform. Links are also provided to the reactions of a range of other parties, and access to various academic studies that have been carried out on different facets of the audit market. We will also seek to update these webpages as the legislative process unfolds.
I hope you will find these pages useful.