SOX - mandatory rotation 446
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Hi,
I would like to know whether SOX introduced mandatory rotation of auditors, in particular, for listed companies and what’s you opinion on this.
The European Commission is drafting a new Directive on statutory audit and it foresees mandatory rotation. I have heard many different opinions on this and I was just wondering if in the US there was a similar debate.
Thanks.
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This post is deleted!
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Section 203: Audit Partner Rotation.
The lead audit or coordinating partner and the reviewing partner must rotate off of the audit every 5 years.
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Thanks, Denis.
Do you think this is an effective measure to ensure auditor’s independence?
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Not really. Though I think the ‘issue’ of auditor independence is somewhat overstated anyway.
I spent 11 years between 2 big 4 firms and never once saw either firms audit opinion compromised through either the provision of non-audit services or too close a relationship with a single partner. We used to have to jump through all sorts of hoops to demonstrate independence and I had personally had to turn down over USD1 million of fees at one point or another due to potential conflicts of interest.
I am not aware of a single case where an auditor has been found (in the legal sense) to have compromised its opinion due to providing consulting services. Although there have been a few cases where they’ve looked bad.
However, where I do think this is a good thing is that I have seen partners (and other staff) fail to challenge things sufficiently because they become too familiar with the client