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Auditor Rotation

It seems (reported in CFO, June 2014) that the PCAOB stopped trying to institute a mandatory Auditor Rotation. However the EU enacted that same concept, with the term limit of 10 years (plus additional rules and caveats). Do you think they (PCAOB/SEC) should limit engagements or is the system we have working?

Answers

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

I am more concerned about the ancilliary consulting services that audit firms do at the same time expressing opinion on the financials. That being said, I agree with auditor rotation.

Ken Stumder
Title: Finance Director / Controller
Company: Ken Stumder, CPA
(Finance Director / Controller, Ken Stumder, CPA) |

At one point the consulting arms at audit firms were spun off so as not to impair independence but I'm seeing signs that they are back in full force.

Anonymous User
Title: CFO
Company: Local Government Agency
(CFO, Local Government Agency) |

I worked on a multi-million dollar ERP implementation years back where Anderson Consultants were brought in to implement the project. They got offices, equipment, access to everything and were treated like employees, which I found, and continue to find when I encounter it, disconcerting in the first place. Companies need to maintain arm's length with contractors to ensure contract compliance an no shenanigans.

I had this running, friendly debate with the AA head of the project about the appropriateness of AA, or any auditor, providing consulting services while also providing independent audit services. He was highly educated, very capable and very well spoken. Of course, he also had this wonderful British accent that always sounds so sophisticated and intelligent to boot.

I was an advocate that it was inherently a conflict of interest that an audit firm provided consulting services, or most anything else for that matter, in addition to independent audits. He defended their choice with the "separate units" argument as mentioned below.

Of course, that was years ago. But after the Enron fiasco and AA, the world's oldest and largest audit firm imploded, I have been left wondering how that project manager feels today. Did he change his mind? :-)

The proof was in. :-(

Topic Expert
Regis Quirin
Title: Director of Finance
Company: Gibney Anthony & Flaherty LLP
LinkedIn Profile
(Director of Finance, Gibney Anthony & Flaherty LLP) |

I believe auditor rotation would have been good for both Investor safety and competition. Congress over stepped when they shut it down.

Topic Expert
Patrick Dunne
Title: Chief Financial Officer
Company: Milk Source
(Chief Financial Officer, Milk Source) |

I agree with auditor rotation, no matter how painful it is. Ten years is appropriate.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Actually, ten (10) years is too long. In ten years, lots of behind the door relationships can be forged to the investor detriment.

Also, the rebid process as described in the story (don't remember whose, US or EU) was weak at best, since it was just a process, it didn't lock-out the current auditor from re-winning.

We all know how bids or RFQs can be designed so that only one vendor will win.... It defeats the stated purpose.

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