The article in the url below centers around a straight forward question:
“Should accountants have term limits?”
“Should accountants have term limits?”
The inertia in firm relations with their auditors is shocking:
“Since the Securities Act of 1933, public companies have been required to get independent audits each year, assuring investors that a fresh set of eyes has inspected the books. But those eyes aren't always the freshest. According to Audit Analytics, a research firm in Sutton, Mass., 30% of the 1,000 leading U.S. companies have used the same firm to audit their books for at least a quarter-century. Fully 11% have used the same audit firm continuously for 50 years or more. Eight companies haven't changed auditors in at least a century.”
“Since the Securities Act of 1933, public companies have been required to get independent audits each year, assuring investors that a fresh set of eyes has inspected the books. But those eyes aren't always the freshest. According to Audit Analytics, a research firm in Sutton, Mass., 30% of the 1,000 leading U.S. companies have used the same firm to audit their books for at least a quarter-century. Fully 11% have used the same audit firm continuously for 50 years or more. Eight companies haven't changed auditors in at least a century.”
Corporate governance best practice suggests that this degree of longevity does nothing to increase active oversight of executive decision making. Vested interests within the auditing profession, however, indicate that meaningful change will be difficult:
“The Public Company Accounting Oversight Board, which regulates auditing firms, is asking whether long tenure might lead to complacency. Late last year, the board sought opinions on whether it should require listed companies to rotate their accounting firms every few years. The last of those 611 public comments came in to the PCAOB earlier this month. An overwhelming 94% were opposed to term limits. The common refrain: Rotating audit firms every few years would raise costs, reduce the familiarity of accountants with a company's books and impair the quality of audits.”
“The Public Company Accounting Oversight Board, which regulates auditing firms, is asking whether long tenure might lead to complacency. Late last year, the board sought opinions on whether it should require listed companies to rotate their accounting firms every few years. The last of those 611 public comments came in to the PCAOB earlier this month. An overwhelming 94% were opposed to term limits. The common refrain: Rotating audit firms every few years would raise costs, reduce the familiarity of accountants with a company's books and impair the quality of audits.”
Take care
David
Instructor Teaching Site: http://www.sagepub.com/strategiccsr/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/
One Cure for Accounting Shenanigans
The Intelligent Investor
By Jason Zweig
The Wall Street Journal
January 14-15, 2012
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