PracticeAuditPCAOB: Rotation could free auditor from pressure

PCAOB: Rotation could free auditor from pressure

PCAOB says mandatory firm rotation could ease pressure to maintain long-term client relationships, boosting independence

MANDATORY FIRM ROTATION could free auditors from pressure to protect long-term client relationships and so boost independence, according to US watchdog the PCAOB.

Chairman James R Doty (pictuered) said: “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.”

Investors and capital markets could suffer from auditor desire to maintain profitable clients, said Doty, while bringing in a new firm might support a “fresh look” at company financial reporting.

The PCAOB has issued a concept note on auditor independence and firm rotation, seeking feedback on this and other potential measures to raise professional scepticism and objectivity.

Stakeholders have until 14 December to relay comments, and a public roundtable on the topic will be held in March 2012.

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