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August 17, 2011

Comments

CJ

I agree with your post. I listened intently to the PCAOB's meeting and read the concept release with great interest.

What we know: 1) audit costs will increase; 2) audit quality is likely to decrease, at least in the first several years and perhaps the last several years as the best personnel are moved to other audits (particularly on the largest audits, which, as you pointed out, are the ones that matter most; 3)the implementation of such a rule would, at best, be a mess internationally and, at worst, be impossible to implement.

What we don't know: Whether mandatory rotation will have any benefits, let alone benefits that outweigh the considerable costs. How many times did the PCAOB staff say in Tuedays's meeting that they had made no link between audit quality and audit tenure, or that they hadn't done a sufficient root cause analysis to understand whether the audit "failures" were caused by a lack of skepticism attributed to lengthy tenure?

What a waste of PCAOB resources when there are so many other meaningful things they could be doing. They still haven't updated more than half of their interim standards.

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  • © 2007-2019 James R Peterson Special thanks: Francine McKenna. Always with love: Kat and Julie. In memory: Bob White, Stuart Kadison