House Approves Bill Banning Mandatory Audit Firm Rotation
So I saw this headline hit my inbox a couple of days ago from Accounting Today and finally got around to checking it out. In a sign that we continue to regress toward the years when Enron, Worldcom, etc were front page news, the government is in the process of eliminating required audit firm rotation.
It almost makes me laugh to see explanations suggesting the change is simply because data doesn't support any correlation between audit quality and required rotation. Being the natural skeptic that I am, two questions come to mind.
First, I'd like to know what data we're talking about and if it suggests anything meaningful at all. Second, who's definition of a quality audit are we using? Call me crazy but I bet asking potential unexposed criminals what they think they'll be just fine with the change. I'd also hazard to guess Kenneth Lay, Jeff Skilling, and company felt the same way. Basically what I'm saying is this assessment provides little to no value for anyone trying to determine if corporate governance has made any progress over the last decade or so.
This whole audit quality nonsense looks a lot like when I ask my kids if they're tired. Even when they can barely keep their eyes open you can guess their response with 99.9% certainty (I think my five year old daughter said yes once).
All this posturing has nothing to do with protecting key stakeholders as some might have you believe and everything to do with politics (this should come as no shocker). I'd be surprised if the senate doesn't follow suit in short order. Just business as usual.
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