The primary concern of the ESBG has been to safeguard the specific audit system in place for its Austrian and German members. Austria and Germany share a common feature of an original and independent auditing system for savings banks and cooperative institutions based on public law.
During the latest financial crisis several national regulators and supervisors reported incidents where audits conducted by different firms were criticised, some for serious shortcomings. Against this backdrop the Commission launched a Green Paper on Audit Policy in October 2010 which focused on the configuration of the audit market which is dominated by the "Big Four" audit firms Deloitte, PWC, Ernst & Young and KPMG; the report highlighted weaknesses in the system of audits.
Key features of the new Audit Directive and Regulation are:
The introduction of a "mandatory rotation" rule whereby an auditor may inspect a company's books for up to 10 years. This could be increased by 10 additional years if new tenders are issued, and by up to 14 additional years in the case of joint audits, i.e. when a firm is being audited by more than one audit firm.
The legislation requires auditors in the EU to publish audit reports according to international auditing standards (IAS).
The text prohibits "Big 4-only" contractual clauses requiring that the audit be done by one of these firms.
EU audit firms will be prohibited from providing several non-audit services to their clients, including tax advisory services that directly affect the company's financial statements or services linked to the client's investment strategy.