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PCAOB Issues Concept Release on Mandatory Audit Firm Rotation

On August 18, the Public Company Accounting Oversight Board (PCAOB) issued a concept release soliciting comments on potential approaches to enhancing auditor independence. 

The Public Company Accounting Oversight Board ("PCAOB" or "Board") is issuing a concept release to solicit public comment on ways that auditor independence, objectivity and professional skepticism could be enhanced. One possible approach on which the Board is seeking comment is mandatory audit firm rotation, which is explored in detail in this release. However, the Board seeks advice and comment on other approaches as well. The Board will also convene a public roundtable meeting in March 2012, at which interested persons will present their views. Additional details about the roundtable will be announced at a later date.

Among the alternatives in the concept release is the relatively controversial suggestion that audit firms be limited in the number of consecutive years they may serve as a company's auditor.  Sarbanes-Oxley currently requires the lead audit partner and audit review partner be rotated every 5 years.  This new approach being floated would require the firms themselves to be rotated.

Comments on this concept release should be received by the the PCAOB no later than 5:00 PM EST on December 14, 2011.  The PCAOB has tentatively scheduled a roundtable to discuss this concept release for March of 2012.  

The full text of the concept release is available at:  http://pcaobus.org/Rules/Rulemaking/Docket037/Release_2011-006.pdf