PCAOB Solicits Comments on Mandatory Audit Firm Rotation

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On August 16, the Public Company Accounting Oversight Board (PCAOB) issued a Concept Release in which it proposed mandatory audit firm rotation as a method to enhance auditor independence, objectivity and professional skepticism. The PCAOB stated that its inspections frequently indicated audit deficiencies that may be attributable to a failure by an audit firm to exercise the required independence, professional skepticism and objectivity by putting the interests of company management before that of investors. The PCAOB stated that a mandatory audit firm rotation requirement, by ending an audit firm's ability to turn each new engagement into a long term income stream, could fundamentally change an audit firm's relationship with its audit client and might, as a result, significantly enhance the audit firm's ability to serve as an independent gatekeeper.

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