Reuters: Regulatory News: UPDATE 1-U.S. House votes to block watchdog from imposing audit term limits

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UPDATE 1-U.S. House votes to block watchdog from imposing audit term limits Jul 9th 2013, 00:50 Mon Jul 8, 2013 8:50pm EDT WASHINGTON, July 8 (Reuters) - In a rare show of bipartisan unity, the U.S. House of Representatives voted on Monday to block an auditor industry watchdog from forcing companies to switch auditors, a regulatory move that could break up some business relationships over a century old. The 321-62 vote was a partial victory for big businesses and major audit firms, which oppose mandatory auditor rotation, though it is still unclear whether there is any appetite in the U.S. Senate to take up the measure. The Public Company Accounting Oversight Board, which regulates auditors, has been debating auditor rotation since 2011 as one way to ensure that auditors are impartial when they check companies' books. Created by the 2002 Sarbanes-Oxley Act, the watchdog was set up to be an independent overseer of the audit profession, which had previously been self-regulated. Backers of rotation say it is necessary to break up cozy relationships that develop between auditors and their clients over many years. Outside auditors are required by law to be independent so they can check companies' books with a skeptical eye. Dozens of U.S. companies have had the same auditor for 25 years or more. Conglomerate General Electric Co has had the same auditor since 1909; consumer goods maker Procter & Gamble Co, since 1890. But mandatory rotation has drawn fierce opposition from business groups and auditors, including PricewaterhouseCoopers , KPMG, Deloitte & Touche LLC and Ernst & Young LLP. Critics have said it would raise audit costs, but not improve audit quality. "Implementing this proposal would significantly impair the quality of public audits ... and harm investors and consumers," said Virginia Republican Robert Hurt, who sponsored the bill along with New York Democrat Gregory Meeks. The PCAOB has considered a host of reforms to improve audit quality, partly in response to the 2007-2009 financial crisis when auditors failed to warn of problems at companies that later collapsed. European regulators are also considering auditor rotation as part of a broad package of auditor reforms. A spokeswoman for the PCAOB did not say whether the issue of auditor rotation is off the table, noting that the board had solicited opinions on the "longstanding debate over mandatory audit firm rotation." "The board continues to pursue the best means of fostering auditor independence, objectivity and professional skepticism," PCAOB spokeswoman Colleen Brennan said. The major support from Democrats for the bill on Monday may come as a surprise to some, since they have typically defended the PCAOB and pressed for it to remain independent. But their strong backing of the bill was foreshadowed last month after the House Financial Services Committee unanimously approved it in a 52-0 vote. Maxine Waters of California, a liberal-leaning Democrat and the ranking member of the House Financial Services Committee, said on Monday she supports efforts to bolster auditor independence, but not through term limits for audit firms. Audit firm rotation "will significantly increase costs for companies, as well as diminish the quality of information upon which investors base their investment decisions," she said. "It is not clear to me that requiring a public company to change auditors every so many years will contribute to auditor independence," she added. The American Institute of CPAs issued a statement almost immediately after the bill's passage applauding the legislation. "In the absence of evidence that mandatory audit firm rotation would enhance audit quality, the House has sent regulators in the United States and Europe a clear message that the time has come to end the debate over rotation," said Barry Melancon, the group's chief executive. Link this Share this Digg this Email Reprints

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