EU strikes preliminary audit rotation deal

The European Union (EU) on Tuesday struck a preliminary audit rotation deal to restore investors' confidence in the quality of bookkeeping and ensure the financial stability. Negotiators from the European Parliament and EU member states brokered the deal which requires companies to switch auditors every 10 years, or 20 years if they put the work out to tender with a decision not to change. Companies that use two auditing firms only have to switch every 24 years. Calling the deal "welcome", the EU's internal market commissioner Michel Barnier said this is "a first step towards increasing audit quality and re-establishing investor confidence in financial information, an essential ingredient for investment and economic growth in Europe." The financial crisis highlighted serious shortcomings in the stability of the EU economic and financial system, and auditors play an important role by providing stakeholders with an accurate reflection of the veracity of company's financial statements. However, a number of banks were given clean bills of health despite huge losses from 2007 onwards. The deal still has to be approved by EU national governments and the full European Parliament.