The House Financial Services Committee has unanimously passed legislation prohibiting the Public Company Accounting Oversight Board from mandating the automatic rotation of a public company’s independent external auditor.
The PCAOB issued a concept release in August 2011 proposing mandatory audit firm rotation as one way to improve audit firm independence and held a series of roundtable meetings across the country last year to gauge sentiment from accountants, investors, academics, business leaders and other groups (see PCAOB Hears Input on Auditor Independence and Firm Rotation). After hearing a series of objections to the concept, the PCAOB has not yet formally said what decision it would make. The congressional bill, H.R. 1564, the Audit Integrity and Job Protection Act, was introduced by Rep. Robert Hurt, R-Va., and Rep. Gregory Meeks, D-N.Y., with the goal of short-circuiting the process. They argued that selecting a company’s external auditor should be a decision made by a public company’s board of directors and ratified by its shareholders, not a decision made by a regulator. H.R. 1564 would amend the Sarbanes-Oxley Act to allow public companies to maintain their auditing practices and avoid additional costs.
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