PCAOB reopens comment period on audit firm rotation concept release

BY KEN TYSIAC

The PCAOB has reopened its comment period regarding a debated concept release on auditor independence and audit firm rotation.

The original comment period closed Dec. 14. The new deadline is April 22, the PCAOB said Wednesday. The board extended the deadline to incorporate comments following a March 21–22 public meeting on the issue that will take place in Washington.

More than 600 comment letters on the issue already have been posted on the PCAOB’s website. An AICPA letter, dated Dec. 14 and signed by AICPA Chairman Greg Anton and President and CEO Barry Melancon, supported enhancing auditor independence and objectivity but opposed mandatory audit firm rotation. The AICPA letter said mandatory firm rotation would be costly and that research indicates it may have an adverse effect on audit quality.

Audit firm rotation has become a significant issue during the past eight months. In November, the European Commission proposed limiting the period in which an outside audit firm can perform audits for public companies to six years. A nine-year window would be allowed for companies opting for voluntary joint audits.

The 41-page PCAOB concept release document presents 21 questions that the board asks respondents to answer. The release says the board is particularly focused on weighing the advantages and disadvantages of audit terms of 10 years or greater.

In December, at the AICPA’s National Conference on Current SEC and PCAOB Developments, PCAOB Chairman James Doty acknowledged that auditors generally oppose mandatory firm rotation, but asked constituents to think about whether there is a better solution.

Ken Tysiac ( ktysiac@aicpa.org ) is a JofA senior editor.

More from the JofA:

 Find us on Facebook  |   Follow us on Twitter  |   View JofA videos

SPONSORED REPORT

Post-busy season checklist

Now that tax season is over, pause for some introspection to guarantee that next year’s busy season is even better. Bonus: “Dirty dozen” scams list to share with your clients. Sponsored by Thomson Reuters, Bloomberg BNA, Bloomberg BNA // Software and Wolters Kluwer.

QUIZ

News quiz: Risks are top of mind in finance

Americans are worried about risks to their financial security. Accountants also see risks to their organizations and their careers. See how much you know about recent news and reports with this quiz.

CHECKLIST

Auditing risks in culture

Cultural flaws can seriously damage an organization. Here’s how internal auditors can reduce risks by embedding culture audits into existing audit programs.