The Public Company Accounting Oversight Board’s proposal to require mandatory rotation of auditing firms for publicly traded companies has already been drawing flak a day after it was released.

The PCAOB issued a concept release Tuesday asking for comments on its proposals for encouraging greater auditor independence, including having companies change their audit firms every few years (see PCAOB Proposes Mandatory Auditor Rotation). However, the proposal is drawing criticism not only on from Accounting Today readers, judging by the comments we received beneath the news report, but from some leaders in the profession.

Jeff Weiner, the chief executive at the accounting firm Marcum LLP, issued the following statement on Wednesday:

“As one of the nation’s leading SEC audit firms serving middle-market companies, Marcum is concerned about the PCAOB’s announcement that they intend to revisit mandatory auditor rotation,” said Weiner. “There are not many PCAOB-registered audit firms qualified to meet the unique needs and partner-level attention required by America’s mid- and large-cap companies. Mandating ‘term limits’ for audit firms will lead to higher upfront costs for companies due to the time required to screen new firms as well as for the firm selected to get up to speed with a company’s operations/financial systems and to create new audit files. In addition, for the largest SEC registrants, the independence issue will reduce the number of firms available for rotation. There may not really be as many choices of firms as the numbers might suggest.

“Marcum believes that any effort at mandating audit firm rotation should undergo a thorough cost-benefit analysis weighing the benefits of perceived greater independence and objectivity against the costs of switching,” Weiner added.

The chief executive of another major accounting J.H. Cohn, also expressed his reservations during a meeting Tuesday at the Accounting Today offices (see J.H. Cohn CEO Sees Need for Auditor Training).  “It will add more cost and lend itself to more error,” said J.H. Cohn CEO Tom Marino. “How many firms can audit an auto manufacturer?”

Even on the other side of the Atlantic, at least one accounting organization official sounded a skeptical note. Robert Hodgkinson, technical executive director at the Institute of Chartered Accountants in England and Wales, noted the resemblance between some the PCAOB’s concept release and some proposals that have also been under consideration in Europe (see Europe Mulls Limits on Audit Firm Concentration).

“The PCAOB’s latest concept release looks at an area that the European Commission put on the table in last October’s Green Paper on Audit Policy,” Hodgkinson said in a statement. “Would mandatory auditor rotation improve auditor independence and skepticism? Ultimately, audit quality is what matters, and independence and scepticism are important to achieving it. Mandatory auditor rotation is a complex issue that has been debated for nearly half a century.  “The evidence on mandatory audit firm rotation to date has not been supportive and has pointed towards a potential loss of audit quality. That is why international auditor independence requirements focus on rotation of the engagement partner and other key audit partners rather than rotation of firms. After all, audit partners are the individuals who take the decisions and so safeguards need to be applied.

“It is encouraging that the PCAOB is planning further research and rigorous analysis, basing its conclusions on evidence, rather than speculation,” Hodgkinson added. “The most critical question is ‘would it work?’ Another important concern is the potential cost.”