The accounting profession suffered another blow this week when the Securities and Exchange Commission proposed two new rules related to auditing, which would severely curtail how many firms now operate.
The main proposal would forbid audit firms from tying compensation or other rewards to the amount of consulting business partners reap from audit clients - a common practice. The fear is that auditors don’t have much incentive to be tough on audits if they’re relying on those same clients for their Christmas bonus.
The other proposal would force firms to rotate audit partners every five years. That’s a business killer for small firms with just a few audit experts, who could not possibly meet such a criteria.
