The Public Company Accounting Oversight Board plans to hold an open meeting next Tuesday to discuss its proposed regulations calling for greater auditor independence and mandatory rotation of audit firms.
During Tuesday’s meeting, the PCAOB will consider a “concept release” that would solicit public comments on ways to enhance the independence, objectivity and professional skepticism of audit firms. Among the proposals the PCAOB plans to consider is one requiring mandatory audit firm rotation.
PCAOB chairman James Doty has already spoken about this possibility during a speech in June (see PCAOB May Require Mandatory Audit Firm Rotation).
“I believe it is incumbent on the PCAOB to take up the debate about firm tenure and examine it, with rigorous analysis and the weight of evidence in support and against,” he said. “I don’t have a predetermined idea as to whether the PCAOB ultimately should adopt term limits. My only predilection is that the PCAOB deepen the analysis of how we can better insulate auditors from client pressure and shift their mindset to protecting the investing public.”
The European Commission has also been examining the possibility of requiring companies to rotate their auditing firms as a way of increasing competition in the audit profession (see Europe Mulls Limits on Audit Firm Concentration).
Approximately 175 companies in the S&P 500 have stayed with the same audit firm for at least 25 years, according to the research firm Audit Analytics.
The PCAOB meeting is open to the public and will be webcast through a link on the PCAOB’s Web site, www.pcaobus.org, which will be made available on the day of the meeting. The meeting starts at 9:30 am Eastern time on Tuesday. Later in the day, the meeting also will be available via podcast.
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