TheCorporateCounsel.net

July 12, 2013

House Passes Bill Banning Mandatory Auditor Rotation Rules

Earlier this week, Broc blogged about a bill that was unanimously approved by the House Financial Services Committee and which targets the PCAOB’s ability to adopt rules mandating auditor rotation. That bill, H.R. 1564, the “Audit Integrity and Job Protection Act,” passed in the House on Monday evening by a vote of 321-62. The bill would prohibit the PCAOB from requiring companies to use specific auditors or require the use of different auditors on a rotating basis. The bill now will be taken up by the Senate Committee on Banking, Housing, and Urban Affairs. In addition to seeking to prevent the PCAOB from adopting mandatory auditor rotation rules, the bill would direct the GAO to revisit a 2003 study of the potential effects, including costs and benefits, of mandatory audit firm rotation.

For the life of me, I can’t figure out what sort of job protection this bill is providing, as implied by its title. Much like the JOBS Act (which included its own swipe at mandatory auditor rotation), this bill doesn’t really seem to have much to do with preserving jobs, other than perhaps for lobbyists.

NYSE Proposes 1-Year Transition Period for Internal Audit Function

From Jay Knight of Bass, Berry & Sims: Last week, the NYSE filed a proposal with the SEC to amend Section 303A.00 of its Listed Company Manual to provide a one-year transition period to comply with the internal audit requirement of Section 303A.07(c) for companies listing in connection with an IPO, as new registrants or a carve-out or spin-off. Section 303A.07(c) requires that listed companies – which are subject to Section 303A.07 – must have an internal audit function to provide management and the audit committee with ongoing assessments of their risk management and internal control processes. Companies may choose to outsource this function to a third party other than its independent auditor. The proposal should take effect within 45 days of the date of publication in the Federal Register (or a longer period as the SEC may designate up to 90 days).

Earlier this year, Nasdaq proposed a rule that would have required Nasdaq-listed companies to establish and maintain an internal audit function, similar to the present NYSE requirement. However, Nasdaq withdrew that proposal citing comments from issuers and to allow more time to consider the issue. The NYSE highlights the different exchange standards in its rule proposal when it states: “Moreover, given that any company which would be able to avail itself of the proposed transition could list on Nasdaq without ever having to comply with an internal audit requirement, the Exchange believes that investors would be at least as well protected by having these companies listed on the [NYSE], where they would be subject to such a requirement after the transition period.”

Tune in next Thursday, July 18th for the webcast – “The NYSE Speaks ’13: Latest Developments and Interpretations” – to hear from senior staffers John Carey and Carol Hoover of the NYSE discuss all the latest from the exchange.

More on “The Mentor Blog”

We continue to post new items daily on our blog – “The Mentor Blog” – for TheCorporateCounsel.net members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:

– Should Startups Announce Their Funding?
– EU Touts Regulatory Pressure in Improving Board Gender Balance
– Does the Media Provide Certain Investors With News Seconds Faster?
– Moving On Up: The Art of Becoming a Director
– Response to “Inside Straight: Stop The Audit Letter Lunacy!”
– Inside Straight: Stop The Audit Letter Lunacy!
– Indemnify Me, Maybe

– Dave Lynn