* Lawmakers slam PCAOB's audit firm term-limit idea
* Rep. Garrett says PCAOB has "activist" agenda
* Lawmakers skeptical of publicizing disciplinary action
* PCAOB chairman says has no pre-conceived view on rotation
By Sarah N. Lynch
WASHINGTON, March 28 U.S. politicians slammed
the U.S. auditing industry watchdog on Wednesday for its push
toward publicizing disciplinary proceedings and for considering
term limits for audit firms, saying such measures would amount
to "regulatory overreach."
Republicans and some Democrats at a House of Representatives
Financial Services subcommittee hearing criticized policy
initiatives under way at the Public Company Accounting Oversight
Board, or PCAOB, which polices the firms that audit
"I am very concerned about some of the recent activist
proposals put forth by the PCAOB," said New Jersey Republican
Scott Garrett, chairman of the panel that held the hearing.
Created by the 2002 Sarbanes-Oxley Act after book-cooking
scandals at Enron Corp and other large businesses, the PCAOB has
stepped up its scrutiny of audit firms since the financial
crisis of 2007-2009 laid bare severe weaknesses.
LAWMAKERS TARGET ROTATION
One of the most controversial ideas being considered by the
PCAOB is whether corporations should be made to switch audit
firms every few years to boost their independence and keep them
from becoming too cozy with corporate management.
Last week, the PCAOB held a two-day roundtable on the idea,
known as auditor rotation, where it heard mixed views.
The Big Four audit firms - PricewaterhouseCoopers,
KPMG, Deloitte & Touche LLC and Ernst &
Young LLP - have been spending record-setting sums on
lobbying and campaign donations in the face of several
challenges from the PCAOB, including auditor rotation.
The firms oppose it and the U.S. Chamber of Commerce has
been trying to persuade lawmakers to do the same. One
Republican, Michael Fitzpatrick of Pennsylvania, has already
drafted a bill that would strip the PCAOB of the authority to
Other Republicans on the panel said they felt the PCAOB
should not even start exploring the topic without first
conducting a cost-benefit analysis to see if it is needed.
"Regulatory overreach at least appears to be alive and well
at the PCAOB," said House Financial Services Committee Chairman
He added he has "serious concerns" that auditor rotation
could raise costs and reduce quality.
PCAOB Chairman James Doty told the panel the board had good
reason to look into the issue, noting that examinations of audit
firms by the PCAOB over time have uncovered examples where
auditors' skepticism had been compromised.
"This is not an isolated issue," he said.
He also said the PCAOB is still in the very early stages of
considering auditor rotation and it is too soon to say whether
the board will even take any action.
"We are not committed to any particular approach to
independence and objectivity," he said.
He added that it would be putting "the cart before the
horse" to even begin a cost-benefit analysis at this point.
DISCIPLINE PLAN UNDER FIRE
On a related topic, some lawmakers on Wednesday attacked a
push by the PCAOB for legislation to allow the board to make
disciplinary proceedings against audit firms public.
Sarbanes-Oxley now bars the PCAOB from making such
proceedings public unless both parties consent. The board argues
this lets audit firms drag out legal proceedings for years while
keeping audit committees in the dark.
The PCAOB has managed to win some bipartisan support for
legal changes in the Senate, but House lawmakers have expressed
"I understand the concern ... but I also want to hear
whether there is any concern that by making these proceedings
public, we are unnecessarily harming the reputation of a firm
before any official action is taken," said Representative
Carolyn Maloney, a Democrat. "Personally, I don't think we
should do so unless there is an official action taken."
On the sidelines of the hearing, Doty later told reporters
he was not overly concerned about lawmakers' skepticism and he
expected them to have questions.
"This is a good start for us," he added.