• Survey Surprises Surveyors After Finding Support for Auditor Rotation

    By | June 15, 2012

    In a recent survey of public companies assessing views on Sarbanes-Oxley a decade after its adoption, Protiviti also asked companies what they think of the PCAOB's recent suggestions that mandatory rotation might improve auditing. Nearly half of all survey respondents agreed that rotation would have a positive impact. Among large accelerated filers, Protiviti said 47 percent of companies were in favor of rotation, and 60 percent of nonaccelerated filers agreed with the idea as well. Even Protiviti was taken back by the numbers. “These results are somewhat surprising as it can be expensive and time consuming to change external auditors, and such an action would represent a very substantial change in the external auditor arrangements for companies,” the firm noted in its report. “Further, the limited number of global network accounting firms significantly restricts rotation options." [CW, Earlier]

    • Lolbisco

      Everybody loves some strange

    • Guest

      When Protiviti says they asked “the company” what it thinks, who did they get the survey responses from? I guarantee you “the company” didn’t form a committee comprised of the majority shareholders, board of directors, CEO, CFO, Controller, GC and the Accounting department to complete the survey in a team effort.

    • Guest

      Because “the company” thinks that the audit firms will just eat the extra costs like they do not when a company switches firms. If auditor rotation was mandatory though, you can bet that those costs would be passed on to the client.

    • Jmw

      How would mandatory rotations affect staffing levels at accounting firms? Seems like there would be more volatility in workforce requirements leading firms to go through more layoffs/hiring binges as they gain and lose big clients.

    • Guest

      This could have potential to bring back audit fees with respect to added hours; however, the company has to shell out the cash.

    • JackofAllTrades4

      It says there’s some people on the board who think some of their mid-tier accounting firm lackies are ready to step-up now that 404b is not an issue anymore . . . I smell some more mergers coming on.

      Since Dodd Frank put the squash on extending 404b to non-accelerated filers – this report doesn’t surprise me for them.  But large accelerated filers, I’d be curious what the top 50% of this group looks like.  Is every public accountant supposed to be considered a contract position now (more than it already is even though some may not realize it).

      http://goingconcern.com/post/layoffs-watch-12-kpmg-it-advisory

      Overall, audit firms have already been adapting to increased automated controls and they’re only going to get more automated.  Even the tools to audit the automated controls are automated (or outsourced to process centers).

      As for hours, no. Firms will need to move towards a mix of hourly and fixed fee approach to coincide with the relatively uniform package of internal software systems (how many companies use Oracle or SAP products, almost all).

    • GuestM

      I don’t think it would have a negitive effect on staffing levels.  specifically due to what has been noted in other comments and the origional article….. This will create a huge amount of additonal work with the change over from 1 firm to the next.  Large accounts change over infrequently.  Some clients have been with firms for decades.  As I’m sure anyone who has been on these types of engagements knows, the audit file isn’t a 1 year thing, the approach, memos, automated test procedures, national approvals, etc represent years and years of work that has been built over time.  

      Its one thing for a firm to get 1 large new client that the office has to absorb the additonal hours in their staffing and billings in their P&L, but its a whole nother ball of wax if 1/4 of your jobs are brand new including a portion of the office and firms largest clients.