EU Regulation on Audit Independence:
EU regulators have implemented measures to ensure the independence of audits for public companies. One of the key measures is the mandatory rotation of auditors.
1. Auditor Rotation: EU regulations require that audit firms rotate their auditors after a maximum of ten years. This is intended to prevent long-term relationships between auditors and clients that could compromise the independence and objectivity of the audit process.
2. Other Measures:
Monetary Limit on Advisory Services (Option B): While limiting the extent of advisory services provided by audit firms can help maintain independence, the primary regulatory focus in the EU has been on auditor rotation.
Preventing Audit Partners from Joining Audit Committees (Option C): This measure could also contribute to audit independence, but it is not the primary mechanism used by EU regulators.
References from CFA ESG Investing:
Audit Independence Regulations: The CFA Institute details the importance of auditor independence in maintaining the integrity of financial reporting. The EU’s requirement for auditor rotation is highlighted as a significant regulatory measure to enhance audit quality and independence.
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