On August 16, 2011, the PCAOB issued a concept release to solicit public comment on ways that auditor independence, objectivity and professional skepticism could be enhanced.17 The concept release discusses mandatory audit fi rm rotation as an approach to improving auditor independence, objectivity and professional skepticism. Mandatory audit fi rm rotation, which has been considered from time to time since the 1970s, would limit the number of consecutive years for which a registered public accounting fi rm could serve as the auditor of a public company.
Generally, proponents of such a requirement believe that setting a limit on audit fees that an auditor may receive from one client would free the auditor from management pressure and offer an opportunity for a fresh look at the company’s fi nancial reporting. In addition, proponents believe that if an auditor knows that one of its competitors will be reviewing its work in the near-term, that such auditor would be more likely to thoroughly and objectively scrub a company’s fi nancial statements. Opponents of this requirement are concerned about costs that changing auditors could impose on issuers. In addition, opponents believe that audit quality may suffer in the early-years of an auditorclient relationship and that mandatory auditor rotation would exacerbate this issue.
While the concept release focuses on audit fi rm rotation, the concept release also seeks input on any other approaches that could meaningfully enhance auditor independence, objectivity and professional skepticism. The PCAOB will hold a public roundtable on the concept release in March 2012. Comments on the concept release are due by December 14, 2011.