On August 16, 2011, the PCAOB opened a 120 day comment period on the concept release in which it proposes mandatory auditor rotation. This comment period ends on Wednesday, August 14, 2011, at 5 p.m. ET.
Relevant information about the matter are included in Docket 37, “Concept Release on Auditor Independence and Audit Firm Rotation.” There are links to a copy of the concept release, comments by each of the five board members, and comment letters received so far.
At the current time, 72 comments have been received. Two were withdrawn, and one deals with a different concept release. Consequently, there are 69 comments on the issue at hand.
After reading all 69 comment letters, not only do I have an intense desire to relieve the pain by hitting myself with a hammer several times in the head, but I can comment on general trends.
By my count, 47 comments (68%) oppose mandatory audit firm rotation and argue for maintaining the status quo, 12 favor mandatory auditor rotation (17%), eight (12%) suggest alternative changes, and two (3%) only raise questions instead of taking a position. Alternatives include letting shareholders vote annually on which audit firm to hire, and having an independent agency assign new auditors.
Because the board assumes that each comment letter is a vote, retaining the status quo currently is winning the election with 68% of the vote. I disagree with the PCAOB’s interpretation of the comment letters. Taken as a whole, the entire collection of comment letters provide ideas and reasons for one alternative versus an idea. Many might identify and agree with views expressed already, and therefore might not be inclined to submit a comment that is redundant to the larger argument.
Based on my analysis of the submitted comments, it appears that investors favor mandatory rotation. On the other hand, corporations and auditors oppose rotation.
Although only one audit firm (Ernst & Young) has tendered an opinion, several retired audit partners were represented (individually or as part of a corporate audit committee) in opposing rotation.
Time to comment is growing short. To have your voice heard, send your comment letter to:
Written comments should be sent to the Office of the Secretary, PCAOB, 1666 K Street, N.W., Washington, D.C. 20006-2803.
All comments should refer to PCAOB Rulemaking Docket Matter No. 37 in the subject or reference line.
Debit and credit – – David Albrecht