US Congress has threatened to block the Public Company Accounting Oversight Board (PCAOB) from proposing regulation to introduce mandatory audit firm rotation.
At a hearing in the House of Representatives, the Financial Services Sub-Committee said the PCAOB is not a policy-making entity and such decisions should stay in the hands of politicians.
Committee member Mike Fitzpatrick, a Republican, proposed a six-line amendment to the Sarbanes-Oxley Act prohibiting the PCAOB from requiring mandatory audit firm rotation.
In response, the PCAOB said it has not tried to push mandatory rotation but just wanted to initiate dialogue about the potential benefits of such a measure.
The move by lawmakers comes a week after the PCAOB held a two-day public hearing discussing mandatory rotation and undermines the PCAOB’s
The PCAOB’s proposal on rotation was widely opposed at the hearing as accounting firms, audit committee chairs, large corporates, preparers and other stakeholders said it would deteriorate audit quality and lead to increased cost. Investors and some academics are in favour of rotation.
The US Chamber of Commerce is one of the strongest opponents to rotation and has asked the PCAOB to “stay focused on its mission”.
“This is not a matter of auditing regulation. This is a matter of corporate governance outside of the PCAOB’s realm,” the chamber stated.