The AICPA Is Killing Auditors

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The auditing profession is in danger of becoming completely irrelevant.  And our supposed advocate is leading the charge.

The AICPA has lobbied hard for Congress to pass a law that prohibits auditor rotation.  And on January 8, 2013 the House passed it.

The AICPA is controlled by the big accounting firms.  And the big accounting firms want to keep their lucrative corporate clients and do not want to listen to the edicts of the PCAOB – which is considering requiring auditor rotation for publicly traded US companies.  

So the AICPA, the big firms, and a handful of corporations convinced the House that auditor rotation costs everyone too much time and effort to no good end.  How short-sighted and selfish.

Does no one remember Enron and Arthur Anderson?  Does no one remember the essential role of the auditor – to express an independent and objective opinion on whether the financial statements are presented fairly?  Does no one remember those the auditors work for – the investors and the public who do not have access to the inner circle of corporate decision making?

This is another example of big money and corporations getting their way at the expense of a powerless and understandably clueless public.  The majority of citizens have no idea what auditors do and don’t do, so this news will not cause them any alarm.

The PCAOB is fighting to make audit reports more transparent and real to readers so they will understand what auditors do.  And do I need to tell you who is resisting this improved transparency and accountability?  Yes, the AICPA, the big accounting firms, and jumbo corporations.  They don’t want transparency or accountability for their actions. 

If auditors are now simply technicians and quality control reviewers who help the corporation create financial statements, who is standing for the public?  Who is keeping watch?

It hasn’t been the auditors for a long, long time.  And this law, if it passes ensures that auditors haven abdicated their essential role to… to no one.  No one will be watching to make sure that corporations don’t lie to the public. 

If this law passes through the Senate, auditors should change their name to something else more descriptive – such as “technical reviewers” or something to that effect - because the objective, independent auditor is dead, thanks to the short- sighted, greedy CPAs at the AICPA who are holding a gun to their own head.


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Article makes no sense. Bill just keeps status quo.

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The audit profession is becoming an irrelevant activity for it does no useful purpose other than to continue the cozy relationship with Corporate management. I would like to see the Auditors are rotated on the basis of their bidding for work every five years and be accountable for what they claim to certify a true and fair view as it is the language used in UK. Also the Auditors should have no other services performed for the same client. The American profession is behind the European standards in Auditing and Accounting standards and must make efforts to move soon to a international set of standards coming from FASB.

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I agree with you that auditor rotation keeps corporations and audit firms from becoming too cozy over time and creating another Enron/Arthur Anderson situation. But your argument that this is somehow going to kill auditing profession is ridiculous. Your supposition I assume is based on the idea that the audit rotation rule that came after Enron suddenly made independent auditors of all. Yes it's true that spending too long with a corporation could lead to problems, but the vast majority of auditors are true to their profession and do their best to remain independent. Let us also be honest that most low level audit staff are nothing more than technical reviewers and the managers and above after having learned the ropes do the real independent thinking. Nothing about the auditing profession has changed or is going to change except the level of risk that something like Enron could go on again. As Doc Robert aptly put it . . . status quo.

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Since when have auditors been independent? How can you be independent when you are being paid by the people you are auditing? This is 800-pound elephant in the elevator that the profession is not dealing with at all. Sarbanes, etc., didn't address it, nor do we want to.

Luckily, economists have. I believe we should eliminate the audit monopoly from the profession, and open it up to competition. Let Lloyds of London provide financial statement insurance for those who want it, let banks do limited audits, and best of all, let the stock market exchanges hire and pay the audit firms of their listed companies. You'd see an explosion of innovation in attest if the free market was allowed to operate. This isn't perfect, but it's much better than the status quo. We can't compare alternatives to some Utopia, but to what we have now, which does not serve the public at all.

The crack about the AICPA being run by the big firms is complete nonsense, by the way. They do an enormous amount for smaller firms that seems to go unnoticed.

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This law was passed July 8, 2013, not January 8, 2013. Lack of basic fact checking under cuts any argument. This 'article' seems to have very little basis in fact but instead is just opinion.

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I am disappointed with this blog post. Although I see merit in the concept of mandatory external auditor rotation -- as well as the idea of having the SEC hire external auditors rather than management -- I do not concur that external auditors will become irrelevant unless external auditor rotation is mandated. There are a wide variety of other approaches to enhance the effectiveness of certified audits, and, in any event, most of the individuals who actually read and use certified financial statements are financially sophisticated. Furthermore, I do not concur that mandatory external auditor rotation will make external audits more transparent and real to readers so they will understand what auditors do, nor that external auditors are not the primary organizations which "stand for the public".

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