Forum Comment Letter on the PCAOB Concept Release on Mandatory Audit Firm Rotation
On December 13, 2011, the Forum filed a comment letter on behalf of its membership opposing a Concept Release put forth by the PCAOB that sought comment on whether mandatory audit firm rotation would enhance auditor independence, objectivity and professional skepticism. The Forum's comment letter notes that the Concept Release cites no empirical evidence – and the Forum is aware of none – showing that mandatory audit firm rotation has any positive impact upon auditor independence, objectivity, and skepticism. The proposal would, however, raise costs to shareholders. The Forum sees no justification for imposing additional shareholder costs in return for speculative potential benefits.
The Forum's comment letter also notes that mandatory firm rotation would impair the ability of an audit committee to do its important work, a result contrary to the express purpose of recent regulatory initiatives designed to strengthen the responsibilities and independence of audit committees. Further, mandatory auditor rotation could critically damage the ability of mutual funds to obtain the high quality and specialized audit services required. In sum, the concept of mandatory audit firm rotation represents a potentially costly initiative that would reduce the choices available to fund boards for audit services without empirical evidence that it would have a positive impact on auditor independence, objectivity, and skepticism. Consequently, mandatory audit firm rotation is not in the best interests of fund shareholders and the Forum's comment letter opposes the concept.
As is the case with every statement made on behalf of its members, the Forum's comment letter was reviewed prior to issuance by the Forum's Steering Committee, which consists of one representative from every member board.