The European Commission reached a provisional agreement Tuesday with the European Parliament and the member states of the European Union on reforming the audit firm market in Europe, requiring public companies in the E.U. to rotate their auditing firms every 10 to 24 years, avoid non-audit services for the same clients, and prohibit Big Four-only clauses.
Under the provisional agreement, which is still subject to technical finalization and formal approval by legislators, audit firms in the E.U. would be required to rotate after an engagement period of 10 years. After a maximum of 10 years, the period could be extended by up to 10 additional years if tenders are carried out, in which the company puts the audit work out for bid, and by up to 14 additional years in the case of a joint audit, that is, if the company being audited appoints more than one auditing firm to carry out its audit.
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