* PCAOB's rotation idea would make companies switch auditors
* Draft Republican bill in U.S. House would rein in PCAOB
By Dena Aubin
March 27 The U.S. Chamber of Commerce, the
nation's largest lobbying group for corporations, is pressing
Congress to block term limits for corporate auditors, ratcheting
up pressure on regulators who are weighing such requirements.
In an effort to strengthen the independence of auditors that
scrutinize corporations' financial books, the Public Company
Accounting Oversight Board (PCAOB) is considering making
companies change, or rotate, auditors every few years.
The idea is opposed by the Big Four firms that dominate
auditing worldwide: PricewaterhouseCoopers, Deloitte
, KPMG [KPMG.UL} and Ernst & Young, along
with many of their large corporate clients.
Rotation would disrupt long-standing and lucrative business
relationships that the Big Four firms have with clients and
force the firms to compete more vigorously among themselves.
The firms say rotation would also increase costs when
auditors start with new clients and have to get up to speed.
In a direct attack on the idea, the chamber said in
testimony prepared for a congressional hearing on Wednesday that
auditor rotation is a corporate governance issue and beyond the
mandate of the PCAOB.
"Congress should stop this effort in its tracks and refocus
the PCAOB on its core mission," the chamber said.
Created by Congress after the book-cooking scandals at Enron
Corp and other companies a decade ago, the PCAOB put its
rotation idea out for public debate last August as one way of
preventing auditors from losing objectivity.
Many big companies have had the same auditor for decades and
some have not changed auditors in over a century.
"One cannot talk about audit quality without discussing
independence, skepticism and objectivity," PCAOB Chairman James
Doty, a former corporate lawyer, said at the time.
Rotation should be considered as a possible counterweight to
the fundamental conflict of interest resulting from auditors
being paid by the companies that they audit, he said.
The chamber's testimony comes days after a sharp exchange
between Doty and a chamber official over rotation.
At a public forum on rotation on Thursday, Doty took the
chamber to task for accusing the PCAOB of exceeding its mandate
as it weighed rotation and other auditor reforms. For details
DRAFT BILL TARGETS ROTATION
Both Doty and Tom Quaadman, a chamber official, are set to
testify at Wednesday's hearing on auditing and accounting
oversight, scheduled by a House of Representatives panel.
One panel member, Pennsylvania Republican Michael
Fitzpatrick, has already drafted a bill that would strip the
PCAOB of the authority to require rotation.
Also voicing opposition to rotation is the American
Institute of Certified Public Accountants, which represents the
In written testimony, the institute said 2002's post-Enron
Sarbanes-Oxley laws, which created the PCAOB, give board audit
committees the authority to hire and fire auditors, and the
PCAOB has not proven that that system is not working.
The subcommittee hearing comes as accounting regulators
consider an array of far-reaching changes, including a switch to
international standards. The U.S. Securities and Exchange
Commission is expected to decide this year whether to make such
Officials of the SEC and Financial Accounting Standards
Board, which sets accounting standards, are also slated to
testify at Wednesday's hearing.