The approach, a change in the audit company after some years, by Public Company Accounting Oversight Board (PCAOB) is not acceptable by many critics. According to PCAOB this would enhance audit feature as discussed at a conference of the firms dealing in auditing accounts. The regulation followed strictly could help make audit quality better.
Auditors need to interrogate the management of the firm on various accounts head to get a clear picture of the company’s financial issues. According to Roderick Hill, a chairperson of Center of Strategic—the most honored management could come up with a number of disorders. In my opinion the audit companies will make a check on the disorders and find a remedy to overcome them and maintain the accounts properly.
As said by Cynthia Fornelli, the executive director of CAQ, that to achieve quality audit it has to be the submission of a well planned accounts by the management of a company to the audit committee members. In this way the audit companies will be able to audit the accounts easily, and the change of the audit company by the management would help in developing well-planned accounts.
Selecting a well known audit company will result in increasing audit expenses. However, a new firm though less costly, would not have a good mutual understanding. Sometimes it becomes difficult meeting the expenses by hiring a big audit company whereas it would cost less to hire a new audit company according to financial means.
The Sarbanes-Oxley Act has restricted the companies to choose a new audit partner every five years. According to Catherine Lego, chair person of audit committees of SanDisk and Lam Research, audit companies have completed their working in the last ten years. They act as an obstacle between management and accounting firms. This keeps a good watch on the financial issues of a company. Every time a new company is taken into service the financial disorders will be challenged.
As said by Lewis Ferguson, a board member of PCAOB, that there are audit companies who are still a malfunction. These companies must be given complete information by their clients about their accounts and the PCAOB inspection. So hence there would not be any failures.
During the conference it was also suggested that a training program must be arranged for the audit companies. Donald Nicolaisen, former chief accountant SEC and chairperson Morgan Stanley’s and Verizon Communications’s audit committees has suggested that the audit associates must assign their name on the audit report, which has been disagreed with. In this way it would be easy for the clients to select the audit company to solve the financial issues. The PCAOB must make sure that all information about the audit company must be given in written statement.
A good number of the panelists opposed the change of auditors, particularly in the case of multinational companies, due to the complications in their accounts. A rule conceded by the senate known as JOBS Act would enlist new audit companies. They should be given minimum five years period to understand the rules. The awareness of the inspection rules of PCAOB would enable any audit company to handle any difficulty in auditing the company’s accounts.
- Johnson, Sarah. “I’ll Take Any New Regulation, Just Not This One” CFO Publishing LLC. March 12, 2012. Web. 6th April 2012.