The PCAOB and You
The Sarbanes-Oxley Act created the Public Company Accounting Oversight Board (PCAOB) in 2002 in response to the corporate scandals and numerous accounting restatements of the 1990s and early 2000s. These scandals cost investors and employees millions of dollars in lost value of stocks and retirement accounts. Sarbanes-Oxley requires the PCAOB to protect the interests of investors and further the public interest in the preparation of informative, fair, and independent audit reports through oversight of auditors of public companies.
As the owner, manager, or proprietor of a business that does not offer accounting services, you may wonder what the PCAOB has to do with you. In fact, if your company is publicly traded, the PCAOB is considering changes to how auditors may interact with the companies they audit that could seriously impact your bottom line.
Beginning in August of 2011, the PCAOB began the process of considering whether to require publicly traded companies to rotate auditors every six or twelve years. They held their second public meeting on ways to enhance auditor independence, objectivity, and professional skepticism, including through mandatory rotation, or term limits, for audit firms in June 2012.
Why should this matter to you?If mandatory auditor rotation becomes a reality, adhering to current rules and standards for corporate governance will become that much more difficult and expensive. You already know how long it takes a new auditing firm to become familiar with the specifics and complexities of your business — just imagine if the law required you to go through that tedious process every few years.