Please ensure Javascript is enabled for purposes of website accessibility
January 30, 2023

KPMG Chairman: Auditor Rotation Is a ‘Terrible Idea’

It's more or less understood by everyone, with a few exceptions, that pursuing mandatory auditor rotation is a giant waste of time.

There has been much discussion of the issue — from the hallowed walls of a PCAOB open meeting to the slums of the Going Concern comment section — and while there has been plenty of robust debate, it's not something worth pursuing largely to the entrenched opposition from the firms, filers, directors, and observers like Francine McKenna and Jim Peterson. Even PCAOB member Jay Hanson admits that it's a tough sell.

Accounting firms have come out loud and strong against the measure, but have maintained an air of diplomacy when discussing it. That seems to have ended with this weekend's WSJ interview of KPMG International Chairman Michael Andrew. Whether you call it "term limits," "sit 'n' spin" or "Big 4 Wheel of Misfortune," Drew seems to have a pretty good idea of where he stands on the issue:

"It's a terrible idea," he says. "We don't think it is effective. It is not going to improve audit quality; in fact, we think it is going to harm audit quality."

If you must know why he feels this way, then you'll be impressed to know that it's not simply out of spite:

[W]hen it comes to things like big banks, there is only a certain small group of auditors who are actually really good at auditing a big bank. So you're going to be, in certain countries, shifting these audits to people who have no capability, no skill, no experience," he says.

Yes, the reality is that the lesser firms out there aren't up to the task and should they be allowed to tackle this challenge then, well…you don't even want to think about it:

"The reality is," he adds, "that if you actually study audit failure, most audit failures occur within two years of a change of auditor. You're actually increasing significantly the risk of audit failure."

Is that what you want? More audit failure? Take a look around you; we're at the threshold of hell as it is. 

Top Auditor Defends the Industry [WSJ]
Earlier: Almost Everyone Thinks Mandatory Auditor Rotation is an Awful Idea

Latest Accounting Jobs--Apply Now:

Have something to add to this story? Give us a shout by email, Twitter, or text/call the tipline at 202-505-8885. As always, all tips are anonymous.

Related articles


An Audit Associate at KPMG’s NYC Office Has Died

Ed. note: an earlier version of this article used male pronouns based on the information available at the time. We have been informed the associate was female, confirmed this information with the NYPD, and have updated pronouns in this article. I debated even posting this at all but everyone is already talking about it and […]

LEGO businessman at a desk

KPMG Vice Chair Hopes All the Tech Layoffs Will Scare College Kids Into Accounting

KPMG Vice Chair Greg Engel has been having trouble sleeping lately. It isn’t climate change or social justice or the price of eggs keeping him up at night, like most accounting leaders he is consumed by the talent shortage. No really, that’s what he told CFO Dive. Not to worry, Engel has hope. Hope that […]