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Health and wellness news has been abuzz about centenarians, but another kind of centenarian is of particular interest to this audience — auditors that have been retained by one public company for over 100 years. This Ideagen blog says the number of 100+ tenured auditors has nearly doubled since 2016 — even as some notable companies have switched long-tenured auditors due to EU regulations. That’s right — the percentage of long-tenured auditors also depends on geography — with the US (and, as John previously pointed out, particularly Ohio for some reason) being a “blue zone” for this purpose. Here’s a reminder from the blog:

Europe and the United States have differed on their approach towards the prospect of mandatory auditor rotations.  During the early 2010’s the PCAOB investigated requiring mandatory auditor rotations for public companies in an attempt to improve auditor independence.  This proposal was debated and ultimately nixed in 2014 after hundreds of comment letters were received from corporate board members addressing concerns about the potential for inexperienced auditors, especially in specialized sectors, and lower audit quality.

The European Union has taken a vastly different approach to the United States. In 2016, new regulations were introduced in the EU requiring companies to rotate their auditor every 10-24 years and conduct an audit tender process every 10 years.

The blog cites independence concerns and a desire to increase competition among auditors as reasons to mandate firm rotation, but it also notes that the data confirms notably larger average audit fees as a result of mandatory rotation due to significant ramp-up costs.

In the US, audit firm tenure continues to correlate with company size:

– Large accelerated filers have the longest average audit tenure of 19.4 years

– Accelerated filers have an average audit tenure of 9.5 years

– Non-accelerated filers have the lowest average audit tenure of 6 years

For folks new to this space, keep in mind that while there’s no mandatory audit firm rotation in the US, SEC rules require the lead and concurring partners to rotate off of their public company client engagements after five years and—upon rotation—to be subject to a five-year “time out” period before being permitted to return to that engagement in those roles. Other audit partners on the engagement are subject to a seven-year rotation requirement and a two-year “time out” period. Check out our “Auditor Engagement” Handbook for more!

– Meredith Ervine