- The European audit reform leads way to change which could also benefit the UAE
Earlier this year, Grant Thornton International welcomed the European Parliament’s approval of the Regulation and Directive to reform the European audit market, which will substantially address investor concerns over auditor communication, long tenure, and excessive volume of non-audit services.
“We welcome the agreement as helpful to European investors and we anticipate that the measures will have long-term, meaningful impact,” said Ed Nusbaum, Grant Thornton global CEO.
Hisham Farouk, Managing Partner of Grant Thornton UAE said, “the audit reform discussions in the EU, the UK, the Netherlands, India and elsewhere have raised the profile of investor concerns. It is clear that some companies have noted the concerns and are already reacting accordingly, but addressing these concerns in the law ensures that there will be change across the European market and that change will be permanent.”
The regulation is effective from 16 June 2016 and could also benefit the UAE. Khurram Bhatti, Partner at Grant Thornton UAE said “the EU audit reform leads way for other regions to also look at the current audit market within which they operate. The most substantial change within the EU audit reform will affect public listed entities, which can benefit from this reform.”
Grant Thornton is pleased to see that the auditor selection and appointment process will be more transparent for large public-interest entities, which will help to facilitate investor understanding of the process and the reasons for selecting a particular audit firm, along with providing investors with information on which to make an informed decision about auditor appointments.
Khurram Bhatti continues to state “European investors called for change to the large company audit market, particularly with regard to concerns that long auditor tenure and the provision of significant levels of non-audit services by the auditor are compromising audit quality (compromised independence and reduced professional scepticism). The UAE can also benefit from adopting this reform to ensure that the audit quality and independence is managed, hence the audit rotation would be a welcomed change for the region. Regulatory bodies in the UAE have already been thoughtful about auditors’ independence and related rotation, consequently the step taken by the European Parliament will certainly provide a platform to the Regulators in bringing reforms to the local market and making the auditing profession truly independent and robust.”
The debate has pushed this topic up the agenda of investors and large company Boards. It is clear that some companies have noted the concerns and are already reacting to the EU reform. However, locally the European reform should be seen as a stance for change which could also transform the UAE audit market to further promote transparenc