Local view for "http://purl.org/linkedpolitics/eu/plenary/2011-09-12-Speech-1-172-000"
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Madam President, I remember very clearly what I said during my hearing before the European Parliament in January 2010. On that occasion, Ms Flašíková Beňová, I gave an undertaking, in accordance with the G20 road map and with the commitment made by the Heads of State or Government of the European Union, that no sector, product or financial market would escape from intelligent regulation and effective supervision.
I have no ideological position on this subject, nor on any other subject for that matter. I want to be determined and pragmatic. Neither am I on a crusade against the ‘Big Four’, but I do not accept the fact that the market in auditing large companies should be dominated at this point by four large networks alone, when there are at least as many firms that would like to access this market in Europe.
We want more operators, more competition and more dynamism, especially in this segment of the market. Several courses of action can be adopted, and we are working on this in order to boost the market: one is the joint audit solution. I am pleased to note, in this regard, that your report, Mr Masip Hidalgo, shares our view and that, if they are well balanced, joint audits could inject dynamism into the market. We are analysing the possible extension of this solution in Europe. I am also thinking about mandatory, regular, transparent and fairer calls for competition. In this context, I also hope to prohibit restrictive contractual clauses in favour of the ‘Big Four’. I feel that this current practice is unacceptable in a European market in which competition must be free, fair and genuine.
Lastly, my colleague, the Commissioner responsible for competition, Joaquín Almunia, and I are following the efforts of the national competition authorities with interest, and we will certainly also be looking at what other measures can be taken at European level to encourage the emergence of new international auditing firms.
The third and final task is to create, as Mr Paška mentioned, a large European market and to strengthen supervision. Paradoxically, this market, which is concentrated in too few hands, is still very fragmented in each of our countries. European integration is one solution to that. Common European rules would facilitate the free movement of professionals and improve the quality of audits and their supervision by supervisory authorities.
In order to make the audit market more European, I intend to promote the idea of a European passport for auditors. We will take our inspiration, among other things, from certain solutions that have been found in the field of professional qualifications. I think it is unacceptable for auditors to have to take exams in every country they wish to work in.
I will also be proposing the automatic recognition of firms that have already been approved in other States and the granting of a European quality label demonstrating the ability of all the firms concerned to audit larger companies.
Then, lastly, there is another way of contributing to the harmonisation of auditing rules in the European Union and of ensuring professional mobility, and that is – as you said, Ms Flašíková Beňová
by introducing International Standards on Auditing, or ISAs. We are currently examining the best way of doing this, and I agree with the parliamentary report that provisions need to be made for small and medium-sized enterprises. Moreover, this is an issue on which my colleague Antonio Tajani focuses every day.
I wish to make three final, very important points. They concern the supervision of auditing firms and the transparency of their work. Firstly, we want the authorities supervising auditors to cooperate more. I am pleased that you share our view that this cooperation should take place within the European Securities and Markets Authority (ESMA). Now is not the time to create new bodies at European level. Let us use those that exist and make sure that they function properly, and in this way national supervisors – auditors – will also be able to benefit from ESMA’s experience.
Secondly, I also wish to make national supervisory authorities more independent. They must be completely independent from auditors and their professional organisations.
Thirdly and finally, as you put it very well in your report, Mr Masip Hidalgo, we will be recommending that audit reports contain more detail and more information. When carrying out their inspections, auditors gain an in-depth knowledge of the company they are auditing, and of its job types, organisation and risks. They have privileged access to a great deal of information. Unfortunately, it is not always reproduced in a structured way in their reports. This also applies to regulators, managers, audit committees and shareholders. This is another point that can be changed and improved, as Mr Masip Hidalgo has proposed.
Since then, Ms Flašíková Beňová, I and all of my teams have been busy drafting legislative texts aimed at establishing – or re-establishing – rules and ensuring transparency and responsibility. I was going to say restoring ethics where they had disappeared, in the financial markets, so that those markets, which we need, really do work for the benefit of the real economy. Rest assured, Ms Flašíková Beňová
that we will be carrying out this work for all the other sectors, in addition to the audit sector being discussed today. We have already done part of it with you, and you have many texts on your legislator’s table that are already being discussed and that will come to fruition by the end of the year.
I am very grateful to Parliament for its interest in and commitment to this issue. I wanted to give you the updated version of paragraph 13 of my deliberations myself, a few weeks away from the presentation by the Commission – which has been enlightened and encouraged by your report – of its legislative proposals.
We are talking today about one of those sectors, about some of its operators, namely external auditors, not all of whom, as we well know, did their job and managed to sound the alarm early enough during the financial crisis – which, incidentally, is not over. We have taken time to reflect because, in this area as in others, I want us to work together, seriously and without improvising. We have done a great deal of consulting and listening on this complex subject, and the European Parliament has been instrumental in this consultation work. For my part, I am very pleased that Parliament, thanks to the very high-quality report by Mr Masip Hidalgo, broadly supports this idea that I myself have of taking determined action at EU level to make up for the failings of the past.
I thank you, Mr Masip Hidalgo, for your personal commitment. I also applaud the work of several of your colleagues: Ms Swinburne, from the Committee on Economic and Monetary Affairs, who spoke just now, and other Members who contributed to this consultation, Mr Gauzès, Mr Bodu, Mr López-Istúriz and Ms Berès.
This report – and I say this in all sincerity – is in my view a very good foundation on which to work on the proposals that we are going to present in November. There are undoubtedly differences on certain points, and I am very much counting – as Ms Swinburne also said just now – on the determination and the contribution of the two committees, the Committee on Legal Affairs and the Committee on Economic and Monetary Affairs, to develop, together and quickly over the coming months, the new regulatory tools that we need. I am not going to respond to all the recommendations in Mr Masip Hidalgo’s report. I would just like to mention briefly three main aspects of our proposals: the independence of this profession, the opening-up of this audit market, and the creation of a large, more integrated European market, with the strengthening of supervision.
Firstly, independence. Our main concern, which you also share, is the quality and credibility of audits. We need to restore confidence in companies’ accounts. This means that auditors must be independent from the entities they audit. Too often, we find that many companies keep the same auditing firms for long periods of time, decades even; they have even used them for a century – that has happened before now. The result is less confidence in the accounts of the companies concerned, which harms the profession and the companies being audited alike.
I am therefore not ruling out the idea of proposing, in November, the mandatory rotation of auditing firms, a well-managed rotation, after the appropriate period of time. Another factor contributing to the excessive familiarity between auditors and auditees is the provision, by auditors, of too many services described as ancillary or ‘non-audit’ services. For the majority of networks, these services generate more revenue than the audit itself. In these circumstances, are we really certain that objective judgments can be made and that completely independent audits can be carried out on a company that one is also advising on its development strategy? Ms Regner, you highlighted this point very clearly just now.
I am therefore determined to limit, and indeed to prohibit in certain cases, the ‘non-audit’ services provided to audit clients. I believe in uniform rules for the whole of Europe in this area. I also wonder whether we ought not to go so far as to propose 100% audit firms, which would be unable to provide any other services but audits. This would also offer the advantage of opening up these ‘non-audit’ markets to small and medium-sized enterprises. Without this kind of measure, they have no chance of competing with the might of the major firms, as we can see today. We are still discussing the actual feasibility of this option – I need a few weeks to work on it – and its proportionality with regard to the issues at stake in this proposal.
The second task is to ensure that the audit market is more open. Barely a generation ago, this market was shared between eight large auditing firms. Today, it is concentrated, and it is even more concentrated because the companies being audited are larger – Mr Tavares, you said this very clearly. Four firms control around 80% of the market in listed companies. This situation is even more concentrated in some countries, where we no longer talk about the ‘Big Four’ but about the ‘Big Three’ or the ‘Big Two’. In Germany, two firms alone hold 90% of the mandates of the main stock market index, the Dax 30. In Spain, we can even talk about the ‘Big One’, since a single firm certifies the accounts of the largest banks and holds 58% of the major listed companies."@en1
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