Look for proposed changes to the auditor’s reporting model in the third quarter of this year, PCAOB Chair James Doty said this week at the Compliance Week conference.
During his speech, Doty said he hopes to issue another standard on disclosing the use of other public accounting firms, including foreign affiliates, and individual accountants not employed by the principal auditor, later this year. Doty also hopes to have a re-proposed standard on communications with audit committees issued this year.
The PCAOB’s previous concept release on mandatory audit firm rotation created an uproar earlier this year, even generating legislative action to block the proposal.
“More than 630 comment letters have been received, with both preparers and auditors predominantly opposing firm rotation,” Doty acknowledged. “The PCAOB is not alone in examining the issue of audit firm tenure and its effect on financial reporting for the use of investors. Audit and market regulators in Europe are considering regulation in this area. Those of you who work for multi-national companies may be aware of these initiatives.
“Some form of term limits may or may not provide more independence, but I believe we must explore the range of approaches available to free the auditor to think and act independently, to fulfill the high calling and perform the challenging role charted more than a century ago by Theodore Roosevelt in his vision of administration of the law. The relevance, credibility and transparency of the financial audit are rooted in the core values of independence, objectivity and skepticism. These core values must be monitored, protected and enhanced in order to serve the public interest and protect investors in an ever more complex global business environment.”
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