NACD Opposes PCAOB's Proposed Mandatory Audit Firm Rotation
Concept "undercuts the authority of the board and audit committee"
Mar 21, 2012, 08:28 ET
WASHINGTON, March 21, 2012 /PRNewswire/ -- In light of today's Public Company Accounting Oversight Board roundtable—convened to obtain input on a concept release regarding proposed mandatory audit firm rotation—the National Association of Corporate Directors (NACD) restated its opposition to the concept release as originally outlined in a comment letter submitted to the PCAOB last December at www.NACDonline.org/commentletter2011.
NACD is the nation's only membership organization focused on delivering critical insights and proprietary resources that enable corporate directors to apply their wisdom and make sound strategic decisions. NACD's opposition to the PCAOB's proposed regulation reinforces the voices of corporate directors.
"This proposal undercuts the authority of the board and audit committee," said Ken Daly, president and CEO of NACD. "Mandatory audit firm rotation has never been shown to improve the quality of financial reporting. On behalf of the NACD's 12,000 members, mandatory audit firm rotation is not a good idea."
NACD is opposed to proposed mandatory audit firm rotation for five main reasons:
- The board and audit committee are uniquely qualified to evaluate the work of an audit firm. Mandatory firm rotation prevents them from using these qualifications.
- The board and audit committee have a statutory responsibility for the oversight of auditors, including hiring and dismissing them if necessary. Mandatory audit firm rotation supplants this authority.
- Audit firm rotation is unnecessary for objectivity, since there is already a requirement for mandatory audit partner rotation, as well as rules for auditor independence.
- Developing an understanding of the company to deliver the maximum benefits may take years. Mandatory audit firm rotation may have the unintended consequence of limiting that understanding.
- Mandatory audit firm rotation is disruptive, costly and may not improve financial reporting.
More information on NACD's position is available in its comment letter submitted to the PCAOB in December at www.NACDonline.org/commentletter2011.
The National Association of Corporate Directors (NACD) is the only membership organization delivering the information and insights that corporate board members need to confidently confront complex business challenges and enhance shareowner value. With nearly 12,000 members, NACD advances exemplary board leadership. NACD is focused on creating more effective and efficient boards through director-led education and peer forums to share ideas and leading practices based on 35 years of primary research. Fostering collaboration among directors and governance stakeholders, NACD is shaping the future of board leadership. To learn more about NACD, visit NACDonline.org. To join, please contact Kelly Dodd at [email protected] or 202-380-1891.
SOURCE National Association of Corporate Directors
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