NYSSCPA Comments on PCAOB Auditor Independence Release

Earlier this year, the Public Company Accounting Oversight Board (PCAOB) issued a 40-page concept release that explored ways it could enhance auditor independence, objectivity and professional skepticism. One option the release discussed in detail was mandatory audit firm rotation.

• The release "does not provide any correlation between audit deficiencies and a lack of independence in mental attitude." The letter continued that "we believe that it would be presumptuous to require audit firm rotation without more empirical evidence of the causes of audit deficiencies found in the PCAOB’s inspection process."
• The NYSSCPA proposed alternatives to mandatory audit firm rotation: 1) audit firms need to have meaningful policies and a system of quality control which emphasizes adherence to professional standards. 2) Clients need to have audit committees which are competent, have appropriate levels of training and experience, and are diligent in providing oversight to the external audit function.
• The PCAOB should reconsider its rotation proposal: "we believe that it is highly likely that the loss of an SEC Issuer client due to mandatory firm rotation would disproportionately impact firms below the Second Tier which have already felt the impact of engagement partner rotation requirements."