RECENT regulatory changes in the European Union (EU) have sparked off a spate of new auditor appointments in listed entities. In July 2015, British bank Barclays replaced PricewaterhouseCoopers (PwC) with KPMG as its auditors after 120 years of association. In the same month, Aberdeen Asset Management, one of the UK's largest asset manager, picked PwC as its new auditors, ending a 32-year affair with KPMG. Earlier this year, in March, Schroders announced it would switch its auditors of 57 years from PwC to another firm via a tender for its audit. Other corporate behemoths such as Rolls-Royce and Tesco have made similar moves. This is just the tip of the iceberg.

All these changes in appointment came hot on the heels of new rules in the EU where an audit firm can be the auditor of a public interest entity for a maximum period of only 10 years. EU member states can opt to extend this if a tender is held at the end of the 10-year mark. If the incumbent auditor is re-appointed, he can stay in the role for another 10 years, capping it at a total of 20 years. After that, a new auditor must be appointed. Gone are the days when an entity can remain with one auditor for decades. The bottom line is auditors cannot have too long a relationship with their audit clients as a long tenure can give rise to familiarity threats to auditor independence.

In September, the Monetary Authority of Singapore (MAS) issued a consultation paper proposing to dispense with the audit firm rotation requirement for the three local banks. The requirement was suspended in October 2008 due to the global financial crisis and is the only one in Singapore where mandatory audit firm rotation is being applied. In supporting the proposal, the MAS highlighted numerous measures which have been put in place since 2008 to strengthen auditor independence.