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Mandatory Auditor Rotation Against the Law?

July 01, 2013

Would a new policy requiring companies to rotate audit firms every few years help promote auditor independence?

The U.S. House Financial Services Committee unanimously approved a bill on June 19 that would prohibit mandatory auditor rotation of auditors. The bill is a reaction to the Public Company Accounting Oversight Board (PCOPB) debating a policy whether a new policy requiring companies to rotate audit firms every few years would help promote auditor independence.

I wrote a blog about this on August 16, 2011, titled “The End of the Audit Industry as we Know it” in which I noted a number of problems with mandatory auditor rotation.

So many groups and individuals have spoken out against this proposal. The action by the House Financial Services Committee is an example of our elected representatives listening to the people whom they represent. Note—that unanimous passage means that both the Democrats and Republican Committee members voted for this bill.

The bill is H.R. 1564. It was co-sponsored by Robert Hurt, R-Virginia and Gregory Meeks, D-New York.

Moving a bill out of Committee is just the beginning of the process of creating a law, but this is a hopeful sign. If you want to move the Bill along, write to your Representative. Get involved with the people who work for you!

As one of the largest CPA firms in Boston, KLR is unique because they service over 220 not-for-profit organizations with compliance and consulting services. We have extensive experience helping Nonprofit organizations regarding boards, and board responsibilities, charitable contributions, taxes and 990 filing requirements. The KLR Nonprofit team is active in our local community and not-for-profit organizations, visit our Facebook page to see photos from our latest volunteer event.

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