Summary of New EU Rules Affect on the Public Accounting Profession

• In Event: Breakfast and Rountable
  In Roundtable: Table 1

Abstract

The European Union has recently changed significantly the environment for auditors of public entities, which they generally call Public Interest Entities [PIEs], including non-PIE-EU-based subsidiaries of non-EU companies. Such new regulations include:
1. Mandatory rotation of PIE auditors, where the new auditors may not perform services related to the financial year preceding its appointment as a statutory auditor;
2. Cap non-audit fees at 70% of the prior three-year average of audit fees;
3. Expand the definition of non-audit services to include most tax and valuation services, services involving any part of the management or decision-making process, services involved in promoting, dealing in or underwriting shares activities, and control design and implementation services connected with financial reporting;
4. Audit tendering requirements, i.e., have the shareholders chosen from among more than one audit firm;
5. Use audit committee with a majority of independent members;
6. Generally apply International Auditing and Assurance Standards Board standards; and
7. Allow member states to exceed these minimal requirements.

Our presentation will describe these matters, its impact on audit firms’ world-wide operations (e.g., using different audit firms for EU and non-EU operations), and cost-benefit of mandatory auditor rotation and other key elements of this new environment.

Authors

• Alan Reinstein, Wayne State University

• Barbara Apostolou, West Virginia University