123 School Work

SEC PROB

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  Page 2 GAO-04-216 Public Accounting Firms
  created the Public Company Accounting Oversight Board (PCAOB). The
  PCAOB has the responsibility to register and inspect public accounting
  firms that audit public companies, and the authority to investigate and
  discipline registered public accounting firms and to set auditing and related
  attestation, quality control, and auditor ethics and independence standards
  in connection with audits of public companies.
  Senate report 107-205 that accompanied the Sarbanes-Oxley Act stated that
  in considering reforms to enhance auditor independence, some witnesses
  believed that mandatory audit firm rotation3 of public accounting firms was
  necessary to maintain the objectivity of audits, while other witnesses
  believed that public accounting firm rotation could be disruptive to the
  public company and the costs of mandatory audit firm rotation might
  outweigh the benefits. The Congress decided that mandatory audit firm
  rotation needed further study and required in Section 207 of the Sarbanes-
  Oxley Act that GAO study the issues. Specifically, we were asked to study
  the potential effects of requiring mandatory rotation of registered public
  accounting firms.4 To conduct our study, we did the following:
  Identified and reviewed research studies and other documents that
  addressed issues concerning auditor independence and audit quality
  associated with the length of a public accounting firm's tenure and the
  costs and benefits of mandatory audit firm rotation.
  Analyzed the issues we identified to (1) develop detailed questionnaires
  to obtain the views of public accounting firms and public company chief
  financial officers and their audit committee chairs of the issues
  associated with mandatory audit firm rotation, (2) hold discussions with
  officials of other interested stakeholders, such as institutional investors,
  federal banking regulators, U.S. stock exchanges, state boards of
  accountancy, the American Institute of Certified Public Accountants
  3 Mandatory rotation is defined in the Sarbanes-Oxley Act as the imposition of a limit on the
  period of years in which a particular public accounting firm registered with the PCAOB may
  be the auditor of record for a particular public company. For purposes of this report, the
  auditor of record is the public accounting firm issuing an audit opinion of the public
  company's financial statements...