US Body Eyes Mandatory Audit Switches
The US Public Company Accounting Oversight Board has issued a consultation to gauge public opinion on a mandatory rotation of company auditors.
In an effort to improve auditor independence and objectivity, on Tuesday the PCAOB unveiled the 41-page paper asking about the possible benefits of mandatory audit rotation.
The paper asks firms if compulsory switchovers would enhance auditors' objectivity and their ability and willingness to resist pressure fr om management.
A government-appointed report found in 2003 that audit rotation "may not be the most efficient way to enhance auditor independence and audit quality".
It also claimed that initial audit costs of the first year of a changeover would be increased by over 20 per cent under mandatory rotation, with the consultation querying if these additional costs are likely for both small and large firms.
"One cannot talk about audit quality without discussing independence, scepticism and objectivity. Any serious discussion of these qualities must take into account the fundamental conflict of the audit client paying the auditor," says PCAOB chairman James Doty.
"The reason to consider auditor term lim its is that they may reduce the pressure auditors face to develop and protect long-term client relationships