2
Report the financial year in which it next plans to go out to tender and why
going out to tender in this year is in the best interests of its members; and
(b) measures to strengthen the accountability of the auditor to the Audit
Committee, including a stipulation that only the Audit Committee is
permitted to negotiate and agree audit fees and the scope of audit work,
influence the appointment of an audit engagement partner, initiate and
supervise competitive tender processes, make recommendations for
appointment of auditors and authorise the auditors to carry out non-audit
services.
5. On 1 April 2014 the functions of the CC transferred to the Competition and
Markets Authority (CMA) pursuant to Part 3 of the Enterprise and Regulatory
Reform Act 2013 and the Enterprise and Regulatory Reform Act 2013
(Commencement No 6, Transitional Provisions and Savings) Order 2014.
6. By virtue of section 138(3) of the Act, the remedies implemented by the CMA
must be consistent with the findings in the Report unless there has been a
‘material change of circumstances’ or other ‘special reason’ for deciding
differently since preparation of the Report.
7. Since publication of the Report, the European Parliament and the Council
have adopted measures reforming the statutory audit market, namely
Directive 2014/56/EU (the Directive) and Regulation (EU) No 537/2014 (the
Regulation). The CMA considers that this constitutes such a material change
of circumstance or special reason to justify taking these measures into
account in implementing the remedies decided upon in the Report.
8. The Directive amends Directive 2006/43/EC
on statutory audits of annual
and consolidated accounts. The Regulation provides specific requirements
regarding statutory audit of public interest entities (PIEs), which includes listed
companies, credit institutions and insurance undertakings.
9. In particular, PIEs are required to change their statutory auditor every ten
years. Member states can, however, by way of derogation, permit shorter
rotation periods. By way of further derogation, member states may allow PIEs
to extend the audit engagement to up to 20 years, provided that retendering
takes place at least every ten years (we understand the UK Government is
minded, subject to consultation, to take advantage of this derogation and that
Directive 2006/43/EC lays down conditions for the approval and registration of statutory auditors and the rules
on independence, objectivity and professional ethics.