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October 10, 2012

Comments

Richard E. Brodsky

Once again you ask for "proof" that lack of auditor rotation is a cause of fraud, but no such proof is possible because there is no control. There are few or no companies that practice rotation, so there is nothing to which the status quo can be compared. My experience representing auditors has taught me that the fear of losing a client by standing up to an overly aggressive management causes many auditors to pull in their horns. If the auditors and management knew that these auditors would be leaving sooner or later, the auditors' fear quotient would be reduced substantially. Auditors are not born able to bend forward at the waist. It is a well-learned technique born of economic reality.

Jim

Thanks Richard -- but I ask no such thing -- the impossible proof of a negative -- but only recognition of, as I wrote in April, the complete absence of "any evidence of a link between auditor tenure and audit quality."
As for the "fear of losing a client," proof is no less wanting that such would be any less the case for a newly-engaged auditor, especially one stretched by size and competence, or one eager to avoid the obligation to re-audit and opine freshly on financial statements previously reported on by a predecessor.

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  • © 2007-2018 James R Peterson Special thanks: Francine McKenna. Always with love: Kat and Julie. In memory: Bob White, Stuart Kadison