DAY 2: US audit committee chairs told a Public Company Accounting Oversight Board (PCAOB) hearing that mandatory audit firm rotation would undermine audit committees and diminish the work done on improving corporate governance done since the implementation of SOX.
PNC Financial services audit committee chair Paul Chellgren, SanDisk audit committee chair Catherine Lego are vehemently opposed to mandatory rotation.
Chellgren said the audit committee is best suited to change an auditor and should not be forced to choose a less qualified firm.
“Rotation would take a lot of the power given by the SOX to the audit committee away,” he said.
Lego called on the PCAOB to not diminish the role of the audit committee.
“Mandatory firm rotation will not improve audit quality and enhance auditor independence and scepticism. [The] institutional knowledge of auditors runs deep and we can’t just lose that when there is no need to change the audit firm,” Lego said.
Audit committee chairs also called for more guidance by the PCAOB for audit committees. Lego points out that not all audit committee work as effectively as they should.
“We should have best practice examples to help audit committees that are new to the role and processes,” she said.
Chellgren said to the PCAOB that it should be more “proactive in the way you communicate with audit committees”.
Dell audit committee chair Alex Mandl, Stern & Morley chairman Roderick Hills, Lorillard audit committee chair and former BDO US chairman Richard Roede also opposed rotation during the hearing.
The audit committee chairs called for an audit committee charter, which would be a “good weapon” for the PCAOB to ensure audit committees are of a high quality.
PCAOB chairman James Doty said the view of audit committee chairs was amongst the most important and could play a role in the board’s future decisions.