Controversy over auditor rotation | AccountingWEB

Controversy over auditor rotation

A few months ago, I read in the newspaper that the AICPA convinced the House of Representatives to pass a law prohibiting the PCAOB and other American standard setting bodies from requiring auditor rotation. 

That made me angry and so I shot off a blog entry that has caused quite a few comments – from both sides of the fence.  One CPA offered to take me to lunch to discuss his views that rotation is a bad idea.  I love that reaction!  I always like a free lunch.  But my angry blog entry was poorly written and all over the place.  And I feel like I need to clean things up a little bit.

My beef with the AICPA centers on them bypassing a standard setting body to further their own questionable and shortsighted agenda.  As a standard setting body themselves, they should understand the seriousness of their actions.

They are negating the impact and influence of the PCAOB by asking Congress to block the PCAOB’s standard regarding auditor rotation.  The PCAOB was created because the AICPA did a poor job safeguarding the integrity of the auditing profession and the AICPA is again putting the integrity of the auditing profession on the line. 

Are egos at play or is the AICPA motivated by what is ultimately best for the profession?  Auditing is big business.  The big accounting firms that essentially run the AICPA are not interested in tampering with their revenue streams.

The AICPA does not seem to value what auditors are actually selling or what an auditor’s true purpose is.  An auditor is paid to evaluate an audit subject against a given criteria on behalf of the users of information.  Auditors exist and have a job because those who create the information cannot be trusted to meet the criteria on their own.  Self interest may drive the creators to skew the results or the creators may simply make a mistake that they can’t see. 

I want to make it clear – as my first article did failed to do - that I am not convinced auditor rotation will guarantee auditor independence or make the audits any better.  It is one of many ideas floating around out there to keep auditing a relevant profession.  But I do know that it is not good that the AICPA wants to take it off the table as an option forever and ever in the United States by asking for a federal law prohibiting auditor rotation. 

Europe requires auditor rotation every 15 years for bank auditors!  15 years!    To me, that is a ridiculously long time.  After 15 years, we should all move on to something new and welcome a fresh perspective.

I tried to explain all of this to an 11 year old

My daughter was listening to my voice mail along with me yesterday.  A fellow CPA had left a message asking me to call him so we could chat about his views and why he supported auditor rotation. And my daughter asked me what the message was about.

So I said auditor rotation helps auditors remain objective.  And then I asked her if she knew what objectivity was.  No, she didn’t. 

So I asked her to imagine being asked to choose the best dog among three dogs.  And I asked her to imagine that one of the dogs was her beloved pug, Puggers.  I asked her if she would choose Puggers as the best dog and she answered that of course she would.  Then I told her she was not objective or detached from the choice.  That I would not trust her to make that decision because I know that she loves Puggers.  And she agreed that she would not be the best choice as a judge. 

I said that auditors get paid to remain objective.  And without that objectivity we can’t be trusted. 

And then I went on to ask her that if she hung out with the dogs for a while - even if they weren’t her dogs - wouldn’t she get closer to one than the others?  Might she develop an emotional attachment that would make it hard for her to make the judgment call?  Wouldn’t it be a good idea to sometimes replace the judge with someone new who wasn’t attached or who didn’t love the dogs?

Yes, she agreed, rotating judges would be a good idea.  And that, I concluded is what auditor rotation is about.

Auditor rotation is one idea among many

Those who oppose auditor rotation say that it is a waste of time.  That the knowledge auditors gain after years of interacting with the entity is invaluable and shouldn’t be thrown away.   Having been on a few audits for three or more years,  I can see the truth in that statement.  It does make auditing easier for the auditor because we know where to go and who to get information from.  We also understand the political and economic dyamics of the organization better.

But could I assert that my knowledge really helped us focus on what was important more readily than someone who had only been on the audit for two years?  No, I might argue exactly the opposite; that the longer you work with an entity the more you trust them and the less skeptical you become.

Auditor rotation is just one idea among many that should be weighed and debated.  Some people have gone as far as to propose that the federal government should create a huge database of qualified audit firms and then assign auditors to audits.  The auditors would not be paid by the audit client but from a pool of taxes collected for this purpose.  They reason that the root cause of independence problem is that the client writes the check to the auditor.   Am I crazy about this idea?  No, because I do not want government to grow.  But should we talk about it some more? Sure.  Should the AICPA ask Congress act to prevent this or any other idea from being on the table as a topic of discussion?  No.

This blog

Governmental auditors unite! Leita Hart-Fanta, CPA, CGFM, and CGAP is the author of “The Yellow Book Interpreted” and owner of a website devoted to training for governmental auditors. Whether you are an internal auditor or monitor for a government entity or a CPA doing grant audits, you will enjoy Leita’s humorous take on the complexity of auditing in the government environment.

More from this blog

Bloggers crew

Steve Knowles has spent 25 years in business and practice in the UK, but he also worked in the states and the years haven't dulled his way of seeing an alternative view to everyone else, and every day is a new adventure.


Joel M. Ungar, CPA is a lifelong resident of the Detroit area and a graduate of The University of Michigan. He is a principal with Silberstein Ungar, PLLC, a Top 15 auditor of SEC public reporting companies.


Allan Boress, CPA, with over 25 years as a practitioner and consultant to the accounting profession. Mr. Boress is the author of 12 published books in 6 different languages, including a best-seller, The "I-Hate-Selling" Book.


Larry Perry, CPA, CPA Firm Support Services, LLC, is the author of accounting and auditing manuals, author and presenter of live staff training seminars, and author of webcast and self-study CPE programs. He blogs about small audits, reviews, and compilations.

Sandra Wiley, COO and Shareholder, is ranked by Accounting Today as one of the 100 Most Influential People in Accounting as a result of her prominent role as an industry expert on HR and training as well as influence as a management and planning consultant. She is also a founding member of The CPA Consultant's Alliance. Sandra is a certified Kolbe™ trainer who advises firms on building balanced teams, managing employee conflict and hiring staff.

Maria Calabrese, CIR, Human Resources manager for Fazio, Mannuzza, Roche, Tankel, LaPilusa, LLC in Cranford, New Jersey, Maria's topics revolve around the world of: Mentoring, Performance management, and The "Y Generation," a.k.a. "The whY generation".


William Brighenti is a CPA, Certified QuickBooks ProAdvisor, and Certified [Business] Valuation Analyst, operating an accounting, tax, and QuickBooks consulting firm in Hartford, Connecticut, Accountants CPA Hartford.


Ken Garen, CPA, is the co-founder and President of Universal Business Computing Company (, a software development firm of high-volume, high-productivity accounting and payroll technology.


Eva Rosenberg, MBA, EA, is the publisher of, and author of the weekly syndicated Ask TaxMama column. She provides answers to tax questions from taxpayers and tax professionals worldwide.


Amy Vetter, CPA, CITP is the CPA Programs Leader for Intacct Corporation responsible for leading the CPA/BPO Partners nationally.

Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States. He also writes a weekly column in Tax Analysts State tax Notes entitled, "The SALT Effect." For more info, visit his website:
Scott H. Cytron, ABC, is president of Cytron and Company, known for helping companies and organizations improve their bottom line through a hybrid of strategic public relations, communications, marketing programs and top-notch client service. An accredited consultant, Scott works with companies, organizations and individuals in professional services (accounting, finance, medical, legal, engineering), high-tech and B2B/B2C product/service sales.

Rita Keller is a nationally known CPA firm management consultant, speaker, author, mentor and blogger. She has over 30 years hands-on experience in CPA firm management, marketing, technology and administrative operations.

Stacy Kildal is the mom of two fantastic kids, an Advanced Certified QuickBooks ProAdvisor, Certified Enterprise Solutions ProAdvisor, Sleeter Group Certified Consultant, a nationally recognized member of the Intuit Trainer and Writer Network, and co-host of RadioFree QuickBooks.
Michael Alter's blog specializes in providing practical advice to those who seek greater profitability and practice management tactics that enhance deeper client relationships.

Sally Glick, CMO, Principal, Marketer of the Year in 2003 and AAM Hall of Famer in 2007, leads a lively discussion of the constantly expanding roles of marketing and the professional marketers that drive this initiative in accounting firms of all sizes.


The IMA Young Professionals Blog features the insights of IMA’s Young Professionals Committee. Committee members share advice and experiences on careers, continuing education, work/life balance, and other issues affecting young accounting and finance professionals.


FEI Financial Reporting Blog provides highlights from SEC, PCAOB, FASB, IASB, and other regulatory news, including reporting under Sarbanes-Oxley Sect 404. It is written by Edith Orenstein, Director of Technical Policy Analysis at FEI.


Sue Anderson has 30 years of experience in continuing education for accountants. Currently she is the program director for online CPE provider CPE Link.


Jim Fahey is COO of Apple Growth Partners, a regional CPA firm in Ohio. His focus is on the effective and efficient use of technology within the firm by all team members.

Caleb Newquist is the Editor-in-Chief of Sift Media US, overseeing content for both AccountingWEB and Going Concern.

Leita Hart-Fanta, CPA, CGFM, and CGAP is the author of "The Yellow Book Interpreted" and owner of a website devoted to training for governmental auditors.


AccountingWEB is more than just a U.S. team of journalists and financial and technology experts - we have an international side, too! Members of our British team who publish share their ideas, insights, and perspectives from across the pond.