September 25, 2021

Maybe Now You’ll Take the Opposition to Auditor Rotation Seriously

It's fair to say that accounting firms are conservative organizations. That is, they prefer that things in their world remain more or less the same and when extremely rare and unforeseen events occur that mandate change, it be carried out with as little disruption as possible and on their terms. NBD, right?  

The PCAOB, created by virtue of the Sarbanes-Oxley Act in 2002, has been a bit of a nuisance in the regard that they've made suggestions that would upset the natural order of things to a great degree. The Board's Concept Release on Auditor Independence and Audit Firm Rotation has arguably been the most disruptive suggestion to date. Not disruptive in the sense that audit firms actually have to do anything, mind you. Just disruptive in the sense that the firms BITCH about it and get their friends on the Hill to tell members of Congress that this is the worst idea ever conceived. 

Which they aptly did in just over six months. Convinced members of the House of Financial Services Committee said that the Board was taking "activist proposals" and that auditor rotation would "[get] in the way of that economic recovery and private sector job creation.” One would think that egregiously baseless statements such as these would be enough, but there was plenty of substantive opposition the idea. All of these have prompted PCAOB Member Jay Hanson to go on the record that auditor rotation is not likely to happen. He's done it more than once!

But, like I said, accounting firms are a conservative lot and since PCAOB Chairman James Doty isn't ready to drop this, they want a sure thing:

The House Financial Services Committee unanimously recommended a bill to Congress that would prohibit the Public Company Accounting Oversight Board from establishing a system of mandatory rotation for audit firms. In a 52-0 vote, the committee passed the “Audit Integrity and Job Protection Act” to amend the Sarbanes-Oxley Act, which established the PCAOB's authority to regulate the audit profession in 2002. The amendment would say the PCAOB “shall have no authority” under Sarbanes-Oxley to require public companies to use specific auditors or to choose different auditors on a rotating basis. 
Okay, you called in the big guns. We're all VERY impressed. You don't have to be dicks about it.

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