In a keynote speech last week entitled Rethinking the Relevance, Credibility and Transparency of Audits, Public Company Accounting Oversight Board Chairman Jim Doty called for a reexamination of whether there should be a move to mandatory audit firm rotation. Doty delivered the speech at USC's 30th Annual SEC and Financial Reporting Institute.
Mandatory Audit Firm Rotation, More, Coming In Concept Release
Referencing the importance of independence and skepticism, Doty said, “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. 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.
“As such,” he continued, “the [PCAOB] board plans to issue another concept release to explore whether there are other approaches we could take that could more systematically insulate auditors from the forces that pull them away from the necessary mindset.”
Auditor's Reporting Model - Concept Release Coming
As reported in March, the PCAOB plans to issue a concept release for public comment on the Auditor's Reporting Model. Doty added in last week's speech that the PCAOB expects to issue the above-referenced concept release on enhancing auditor's independence and skepticism "around the same time that we issue the concept release on the auditor's reporting model, in order that they can be considered together in a holistic manner."
FEI’s Committee on Corporate Reporting will be closely following these issues to provide thoughtful and practical input from the prepararer's point of view.