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
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.
PCAOB HEARING: A unified line against rotation