The Public Company Accounting Oversight Board issued a concept release on auditor independence and mandatory firm rotation this summer. The release seeks public comment on ways to enhance the independence, objectivity, and professional skepticism of external auditors, with a focus on mandatory audit firm rotation by Securities and Exchange Commission registrants. While the concept release is only the initial stage toward possible rulemaking in this area, auditor rotation is a very important subject that could have a significant effect on the cost and quality of audit services and on the relationship between public companies, audit committees and boards, and external auditors. It is worth noting that regulators in the European Union have also begun exploring possible mandatory audit firm rotation.
