A proposal by the European Union on audit firm operation goes to great lengths to emphasize firm independence and seems certain to create great controversy. Among concepts under consideration are bans on audit firms providing non-audit services such as tax planning and consulting to EVEN non-audit clients, required rotation of audit firms on large clients and limitation on proportion of fees obtained from a given client. The Institute of Chartered Accountants of England and Wales provided mild endorsement, stating that greater transparency on audit firm selection and implementation of International Standards on Auditing appeared to be positive features of the proposal while warning that the final document must consider unintended consequences.
While it is hard to imagine even the PCAOB or SEC going this far in audit firm regulation, doubtless the U. S. audit community, especially the "Big Four" and second tier firms such as Grant Thornton and BDO Seidman, will watch Europe's consideration of this proposal with great interest. Some in the US have called for mandatory audit firm rotation in the past and some further restriction on nonaudit services for audit providers of publicly-traded firms is at least conceivable here. Furthermore, there are some U. S. CPA firms which provide audit services for European companies and they could be impacted by Europe's decision.