Generally speaking, there are two camps when it comes to the idea of auditor rotation or "term limits" as some like to call it.
There is the camp that sees it as an area worth exploring as part of a larger conversation around auditor independence and objectivity. And then there is the camp that does not share that view. In fact, some feel that it is a terrible idea. Actually, most people seem to think it's a terrible idea. It's gotten to the point that when a survey finds some fledgling support for it, people can't help being surprised. Even PCAOB member Jay Hanson can't picture it becoming a reality.
Chairman James Doty seems to be the last man standing on this issue. While we give him credit for pushing an aggressive agenda (although not really a radical one) that disrupts the audit firms' cushy existence, this battle is lost, Jim. LOST, I tell you.
And yet he keeps bringing it up as part of the conversation when we all wish it would just go away. Like Triumph passengers pooping in plastic bags or Beyoncé. WE'VE HEARD ENOUGH.
During his remarks from last week at the Florida Bar Association 31st Annual Federal Securities Institute, he reminded those in attendance how this got started:
In August 2011, the Board issued a Concept Release on Auditor Independence and Audit Firm Rotation. The concept release notes the importance of auditor independence to the viability of auditing as a profession. It asked for comment on ways to enhance auditor independence, objectivity and professional skepticism, including through auditor term limits, which are being debated around the world today.
Yes! Around the world! Just because the political climate and entrenched forces in the U.S. make rotation completely infeasible doesn't mean we shouldn't look at the example being set around elsewhere!
The Dutch Parliament recently adopted audit firm rotation. It appears likely that some companies plan to implement auditor switches ahead of the 2016 deadline.
The European Commission, Parliament and Member States are engaged in their own inquiry. Their legislative deliberations indicate a real likelihood that some form of term limits could be adopted this year. Firms in Europe have had to factor the possibility into their strategic business planning.
People disagree on what the best reforms will be, how to implement them, and indeed whether reform is necessary.
Costs and any potential unintended consequences will have to be considered.
We should not rush to decision.
I don't have the view that independence and skepticism can only be achieved through term limits.