In January , my blog titled “Audit Firm Rotation?” discussed the Public Company Accounting Oversight Board’s (PCAOB) highly debated concept release, proposing mandatory firm rotation as a way to improve auditor independence. The proposal would have required publicly registered companies to switch audit firms after years of working with them: It, in my opinion, was a proposal to change a system that wasn’t broken
Thus, I opposed this legislation back in January, as I did not and still do not believe there is a benefit from forcing companies to change audit firms after several years. Anytime someone does something new for the first time there is always a risk that something gets missed. To me this is a greater risk than any auditor independence issue.
Today, it appears that the U.S. House of Representatives agrees with my views. On Monday it approved a bipartisan bill that would prohibit the PCAOB from requiring mandatory audit firm rotation for public companies.
The bill, sponsored by Reps. Robert Hurt, R-Va., and Gregory Meeks, D-N.Y., was introduced on April 15th 2013. It would amend the Sarbanes-Oxley Act of 2002 to prohibit the PCAOB from requiring public companies to use specific auditors or requiring the use of different auditors on a rotating basis.
Representatives voted 321 to 62 in favor of the bill, H.R. 1564, the Audit Integrity and Job Protection Act. In order to pass, the bill would have to be approved by the Senate, which has not taken up the issue, and next it would have to be signed by the President in order to become law.
We dodged a costly and ineffective move to instill investor confidence. Now that I have the House’s ear (wink wink), maybe they will call on me for some other ideas I have. I am sure I will be waiting a long time for that call. But for now, I can relax on the beach sipping a cold beverage waiting for the next knee jerk reaction to come down the pike.