Contents
1 Introduction ………………………………………………………………………………………………… 9
1.1 Research Question …………………………………………………………………………….. 13
2 The Environment………………………………………………………………………………………… 15
2.1 The Auditor ……………………………………………………………………………………….. 15
2.1.1 The Nature of the Audit Firm ………………………………………………………… 15
2.1.2 Professional Scepticism ………………………………………………………………… 16
2.1.3 Mandatory Rotation …………………………………………………………………….. 18
2.1.4 The Provision of Non-Audit Services ………………………………………………. 20
2.1.5 Audit Quality……………………………………………………………………………….. 21
2.1.6 The Audit Committee …………………………………………………………………… 22
2.2 The Legislator ……………………………………………………………………………………. 23
2.2.1 The History of EU Audit Legislation ………………………………………………… 24
3 The Green Paper of 2010 …………………………………………………………………………….. 33
3.1 Impact Assessment …………………………………………………………………………….. 34
3.2 Legislative Proposals ………………………………………………………………………….. 36
3.3 Regulation…………………………………………………………………………………………. 36
3.3.1 The Regulation Concerning Professional Scepticism ………………………… 36
3.3.2 The Regulation Concerning Mandatory Rotation …………………………….. 37
3.3.3 The Regulation Concerning the Provision of Non-Audit Services ……….. 38
3.4 Appraisal by the European Parliament………………………………………………….. 40
4 Methodology……………………………………………………………………………………………… 42
4.1 The Sample of Responses ……………………………………………………………………. 43
4.2 Interview Participants ………………………………………………………………………… 45
4.3 Limitations of the Research …………………………………………………………………. 46
5 Results ………………………………………………………………………………………………………. 47
5.1 Results According to the Responses to the Green Paper…………………………. 47
5.1.1 Regarding Professional Scepticism …………………………………………………. 47
5.1.2 Regarding Mandatory Rotation ……………………………………………………… 52
5.1.3 Regarding the Provision of Non-Audit Services ……………………………….. 59
5.1.4 Overall ……………………………………………………………………………………….. 63
5.2 Interview Results ……………………………………………………………………………….. 64
5.2.1 In Support of EU Proposals ……………………………………………………………. 64
5.2.2 Against EU Proposals ……………………………………………………………………. 67
5.2.3 Comparison ………………………………………………………………………………… 71
6 Conclusion …………………………………………………………………………………………………. 73
6.1 Subsequent Legislative Developments …………………………………………………. 74
7 Discussion …………………………………………………………………………………………………. 75
References …………………………………………………………………………………………………….. 78
Appendices ……………………………………………………………………………………………………. 87
Timeline ……………………………………………………………………………………………………. 87
Black Monday…………………………………………………………………………………………….. 90
Robert Maxwell ………………………………………………………………………………………….. 90
Polly Peck ………………………………………………………………………………………………….. 90
Enron ………………………………………………………………………………………………………… 91
WorldCom …………………………………………………………………………………………………. 92
Parmalat ……………………………………………………………………………………………………. 92
Royal Ahold ……………………………………………………………………………………………….. 93
Mani pulite ………………………………………………………………………………………………… 94
Coding ………………………………………………………………………………………………………. 95
