Business Groups Urge PCAOB to Drop Mandatory Auditor Rotation
Several business organizations have asked the Public Company Accounting Oversight Board (PCAOB) to drop its consideration of mandatory audit firm rotation.
In a joint letter sent to the PCAOB on April 19, the group said that the board “has not shown any compelling reason to continue further consideration of mandatory audit firm rotation.” The U.S. Chamber of Commerce and the Financial Services Roundtable were among the groups signing the letter, as well as companies such as Viacom, Safeway, United Healthcare and FedEx.
Mandatory auditor rotation has been discussed in the past without being implemented. According to The Wall Street Journal, the idea was rejected by an independent commission in 1978, the U.S. Securities and Exchange Commission (SEC) in 1994 and the U.S. General Accounting Office, now the U.S. Government Accountability Office (GAO), in 2003 after the passage of the Sarbanes-Oxley Act.
The proposal has drawn negative feedback from several groups, including the VSCPA and the American Institute of CPAs (AICPA). Some groups have said that the move would increase the costs of audits and could harm audit quality by decreasing auditors’ levels of institutional knowledge.
Last month, several Congressmen on the U.S. House Capital Markets and Government Sponsored Enterprises Subcommittee criticized the proposal, referring to mandatory rotation as “mission creep.”