Thursday, June 26, 2014

E.U. and U.S. Audit Regulators Take Different Views on Audit Firm Rotation

A dichotomy has arisen in global auditor oversight as the European Union mandates audit firm rotation and the U.S. pulls away from it. E.U. legislation that just went into force would mandate auditor rotation after ten years, while the SEC and PCAOB appear to have considered and rejected the idea of audit firm rotation. The E.U. sees efficacy in a fresh set of eyes on the financial statements and the benefit of breaking audit firm concentration. The state of affairs represents a divergence that will not be changed any time soon. Very astute and informed oversight bodies have divergent views on mandatory audit firm rotation. Apparently, U.S. regulators believe that the Sarbanes-Oxley Act mandated engagement partner rotation goes far enough, while E.U. regulators believe that more is needed.