ICAEW.com works better with JavaScript enabled.

Europe: reconnecting with our closest neighbours

Author: ICAEW Insights

Published: 04 Jan 2023

Myles Thompson, former President of Accountancy Europe, and David Matthews, incoming Accountancy Europe UK board member and former ICAEW President, explain why it’s vital for the UK to have a seat at the EU table.

To the outside world, it may seem slightly incongruous that the President of Accountancy Europe – the voice of the accountancy profession across the continent – should be UK-based, and even more so that he be elected to the role post-Brexit. But as his term comes to an end, Myles Thompson, the KPMG partner in question, is adamant of the need for the UK to be involved when it comes to shaping the EU accountancy agenda.

It was not ideal timing, but the fact that Thompson was already part of the Accountancy Europe furniture, having had a seat on the board since 2012, no doubt helped to oil the cogs. “Even though the UK was moving out of the European Union, everyone was happy that we are still part of Europe, and there are still things that impact the UK. The last two years I’ve been President, it’s never really come across as being an issue.”

As Thompson steps down from the Accountancy Europe board and passes the baton to David Matthews, a former ICAEW President who took over from Thompson as UK board member on Accountancy Europe on 1 January, he maintains that the UK’s involvement is as important today as it ever was – perhaps more so. “The Commission and the other EU institutions are still very keen to know what's happening in Britain. Meanwhile, the UK looks across what’s happening in Europe. There is an interconnection,” Thompson says.

Accountancy Europe brings together 50 professional organisations from 35 countries, between them representing one million qualified accountants, auditors and advisors. It is the voice of those member bodies to the European Commission as well as global regulators and standard setters. “They see Accountancy Europe as being the voice for the whole European profession.”

At the same time, member bodies in the UK still see significant value from having that insight into Europe, and the impact on the UK-based profession, Thompson explains. “We mustn’t forget that ICAEW and ACCA in particular have a large number of members in Europe who are being impacted by what’s coming out of Brussels.”

“The UK has always been a leader in accounting, audit and tax-related matters,” Matthews adds. “Having a voice and bringing insight as to what’s happening in the UK to our European colleagues that helps inform that agenda, both across the professional bodies in Europe, and indeed with the European Commission is important.”

The UK may no longer be part of the European Union but its policies continue to have a significant impact – both directly and indirectly – on the UK. Development of European sustainability standards is a case in point, Thompson says. “They are going to be applicable for all large European listed companies, but also European subsidiaries of large UK listed companies, and that’s going to have an impact on UK businesses and the profession.”

Another thorny issue where there is much shared UK/EU concern relates to the level of concentration in the large audit market with the Big Four firms. Thompson admits that consolidating opinions into one European voice involves an element of diplomacy but in most cases there is a huge amount of alignment in what the profession thinks, he says, despite the magnitude of the debates.

It’s one reason why Accountancy Europe has so much interaction with the Commission, Thompson says. “The Commission understands that it is much easier to deal with Accountancy Europe than trying to deal with more than 20 individual member bodies from the other member states. But yes, there's always compromise. We try to get consensus, but sometimes you’ve just got to accept that the majority rules and that you’re an outlier.”

Growing urgency around the need to address climate change has propelled sustainability issues to the top of the list of European Commission priorities and has resulted in Accountancy Europe continuing to take the lead on sustainability reporting – not just in Europe but also globally. “Business is global and it does not make sense for a business that is listed in Frankfurt, and maybe also in New York and London, to deal with three different sustainability standards,” Thompson says.

Progress is being made but sticking points remain, not least on alignment between global and European standards. “The amount of information that European standard setters believe needs to be reported immediately is just too much. Companies are not going to have the systems or processes to be able to do it,” Thompson says.

In November, the European Financial Reporting Advisory Group (EFRAG) submitted the first batch of draft EU Sustainability Reporting Standards (ESRS) to the European Commission. “There was a big push from the European Parliament that the statutory auditor should be barred from doing any audits of sustainability reporting. Accountancy Europe played a big role in explaining why that just didn’t make sense.”

Thompson is also concerned that overwhelming organisations with sustainability reporting requirements at this stage would be counterproductive. “Companies will just see it as a compliance exercise whereas the point is to get companies to change what they’re doing and have more accountability.”

Without meaningful sustainability reporting, providing assurance to sustainability reporting will be impossible, Thompson warns. “Auditors will be qualifying their assurance all over the place and that’s not going to help anybody either.”

Matthews, meanwhile, believes the UK is blazing a trail when it comes to the focus on sustainability and ESG reporting, and Accountancy Europe has much to gain from the inroads UK institutes have made in helping their members across both business and practice understand how they can contribute to the agenda and use their skills to help organisations adapt to the new world.

“If you look at the number of standards that the European Commission is looking to push into the sustainability space in Europe, it’s huge. Close working across the profession is essential to helping our members understand the implications of those. The UK will be ahead of some other European countries in addressing some of these corporate reporting challenges.”

Meanwhile, against the backdrop of a fraud trial of Wirecard executives underway in Germany, a consultation by the Commission on corporate reporting reform across the three pillars of corporate governance, the audit profession and audit supervision is also underway. “The European Parliament wants to push back against the perceived power of the audit profession, and particularly the Big Four.”

Thompson won’t be overseeing those debates at Accountancy Europe but he is confident that from an advocacy perspective the body is in as strong a position as ever to be part of the debate. “There’s been a lot of work to say, look, we can help you, the profession does want to change. There is much more trust from the Commission but it’s not going to be easy.”

Matthews believes there’s much to be learned from the UK’s own experience of reaching its own audit reform position. “Some of the solutions aren't easy. My motivation at a European level is helping people understand those arguments. But sometimes it’s easier to talk about the need for change, rather than to come up with answers that are going to work for everybody.”

Matthews also recognises the profession’s tendency towards introspection. “It is important that we maintain a dialogue, not just with the political and governmental circles in the form of the European Commission and Parliament, but also with bodies representing pan-European business. The more we understand their priorities, the more we can work together to come up with solutions and speak with one voice on some of those issues,” he says.

As Thompson passes the reins to Matthews, his advice is to use the UK’s experience as the foundation for progress. “I would say the UK is still very much seen as the gold medal winner on corporate governance and audit quality so I would suggest it’s about using that UK experience to help move Europe forward.”

High on Matthews’ agenda for the year ahead is a desire to address some misperceptions of the accountancy profession. “I think our profession has been unfairly judged in the court of public opinion, and to an extent by politicians and the European Commission. By and large, we are a force for good and much of the criticism that we see in the media pains me.”

How those debates will pan out remains to be seen, but the variety of pan-European opinions promises to be refreshing. “Inevitably, people will come from different views but it’s about operating with a degree of sensitivity, recognising that everybody has a reason for their perspectives, and starting with the premise that everybody’s coming to this with the best motivation, even if we might not see eye to eye on everything.”

Discover more from ICAEW Insights

Insights showcases news, opinion, analysis, interviews and features on the profession with a focus on the key issues affecting accountancy and the world of business.

Podcast icon
Insights Podcast

Hear a panel of guests dissect the latest headlines and provide expert analysis on the top stories from across the world of business, finance and accountancy.

Find out more
Daily summaries
Three yellow pins planted into a surface in a row
News in brief

Read ICAEW's daily summary of accountancy news from across the mainstream media and broader financing sector.

See more
A megaphone
Stay up to date

You can receive email update from ICAEW insights either daily, weekly or monthly, subscribe to whichever works for you.

Sign up