Here’s a note from Lynn Turner: “Congress established the PCAOB to oversee and regulate the auditing profession. Now Congress is stepping in and limiting what the PCAOB can do. It perhaps is becoming clear the large audit firms have more clout with their checkbooks with Congress than does the PCAOB. Members of the PCOAB do not appear to have publicly pushed back against such efforts by Congress this year – or last year when limits were imposed on the PCAOB by the JOBS Act.
This story below how the GAO will be asked to study mandatory auditor rotation once again. However, the last study by the GAO was in fact not a study, but more of a survey of auditors and management of the companies they audit. There was limited surveying done of investors.”
The House Financial Services Committee passed 52-0 a bill that would prohibit the PCOAB from dictating which auditor a company is audited by or requiring companies to adhere to mandatory auditor rotation. Republican and Democratic members of the committee agreed that mandating public companies to company with audit firm rotation was not good policy. The PCAOB, which Congress created in the 2002 Sarbanes-Oxley Act, floated the mandatory auditor rotation idea in an August 2011 concept release on auditor independence. The rotation is still under review, and the PCAOB has not issued a specific proposal for implementing it.
During today’s mark-up session, the committee agreed to an amendment offered by ranking member Maxine Waters to require the GAO to study the issue once again, including a cost-benefit analysis of mandatory rotation of auditors.
Study: How Auditors Miss Signs of Fraud
As noted in this Reuters article, this new study of 87 SEC enforcement actions against auditors over 13 years found that most common accounting mistakes involved failing to question documents which appeared to be fake and a lack of professional skepticism. Here’s the related press release.
Webcast: “Post-Closing Claims: What Really Happens”
Tune in tomorrow for the DealLawyers.com webcast – “Post-Closing Claims: What Really Happens” – to hear Goodwin Procter’s Larry Chu and Shareholder Representative Service’s Paul Koenig analyze what truly happens in deals – including practice tips to make your post-closing claim process go as smoothly as possible. Here are Course Materials to print out in advance…
– Broc Romanek