Accounting firms will have to change how they check the books of companies in the European Union even if a British anti-trust probe of the sector finds little wrong, a senior EU lawmaker said.
EU member states and the EU Parliament are scrutinizing a draft EU law that proposes far-reaching changes to improve information for investors and increase auditor choice in a sector dominated by just four companies globally.
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Sajjad Karim, the British center-right lawmaker steering the law through parliament, said on Thursday this week's announcement of a two-month delay to January of initial findings from a UK Competition Commission probe into the audit market would hold him back.
"We had hoped for some level of insight into what they are doing but we are going to carry on," Karim told Reuters.
The so-called Big Four accounting firms which audit nearly all top companies - KPMG, Ernst & Young, Deloitte and PricewaterhouseCoopers - hope the British probe won't come up with radical "remedies".
The four say that would make it harder for the EU to justify any sweeping changes but Karim said the bloc would push ahead and introduce reform regardless.
There was consensus among the lawmakers that changes to the industry's practices were needed and the question was simply how far such changes should go, Karim said.
"Maintaining the status quo is not something I would want to see. That is not something that I will allow to happen," he said.
The lawmakers and member states have faced heavy lobbying from an industry split between the Big Four, wanting minimal structural changes, and smaller firms like BDO, Mazars and Grant Thornton, that see a rare opportunity for intervention to help them break into the blue chip market.
Karim needs a broad cross-party agreement on the draft law to give him a strong hand in negotiations on a final text with EU states.
He has signaled he wants key elements of the draft to be watered down but will have to reach a compromise with the parliament's two biggest parties, which can override him.
Karim said there was no consensus yet on whether companies should be forced to "rotate" or switch auditors, and if so, what should be the frequency.
Lawmakers are also discussing whether to insert a new element into the draft - joint audits, whereby companies have to have two auditors so that smaller accountancy firms can build up experience with major clients.
A final deal with EU states is expected in early 2013 and Karim would like to give the industry until 2014 to get ready.
Parliament's legal affairs committee will debate the amendments to the draft law on November 7 with a vote in December, allowing for joint talks with member states to start in January.
Britain, a major global base for auditors, is among the member states opposing major structural changes to the audit sector but may not have enough support to weaken key elements.
The United States is also watching the EU as its own audit policeman is looking at rotation of auditors as well. (Reporting by Huw Jones; Editing by Helen Massy-Beresford)