Some big U.S. companies have used the same auditing firms for decades, while others like Procter & Gamble and General Electric have each kept the same firm for more than a century.
Those long-time, cozy relationships have some critics urging the U.S. Public Company Accounting Oversight Board to encourage tougher, more independent audits by requiring a periodic rotation in auditing firms hired by companies, Reuters reports.
"When you look at some of the big audit failures over the years, whether it's Enron or Waste Management, you find instances where they've had the same auditor for in some cases decades," said Barbara Roper, head of investor protection for the Consumer Federation of America.
But the Big Four accounting firms -- Deloitte, Pricewaterhouse Coopers, KPMG and Ernst & Young -- are likely to fight any mandatory rotation, which could rob them of lucrative and loyal clients. The firms also contend that good auditing work comes from a detailed understanding of a client company’s operations, which takes time to acquire.
Currently, the partner on an auditing job must be switched every five years, but there is no term limit on the audit firms themselves.
CFTC pick moves forward – The Senate Agriculture Committee yesterday approved President Barack Obama’s Democratic pick for the newest member of the Commodity Futures Trading Commission, an agency tasked with writing rules for the $600 trillion over-the-counter derivatives under the Dodd-Frank financial reform law.
The nomination of Mark Wetjen, 37, now moves to the full Senate, and The New York Times reports that “his chances there are uncertain.” If confirmed, Wetjen would replace Commissioner Michael Dunn, another Democrat, whose term expired in June. Dunn will stay on the CFTC until a replacement is found.
Wetjen, a lawyer, worked with Senate Majority Leader Harry Reid (D-Nev) in writing the Dodd-Frank financial reform law last year.
Republican calls for SEC reform – The Republican chairman of the House Financial Services Committee called for reorganizing the Securities and Exchange Commission, which he said now operates under “organizational incoherence.”
Spencer Bachus of Alabama introduced a proposal called the “SEC Modernization Act” which would fold the agency’s investor advocate into another unit, while giving more power to an ombudsman to field complaints from businesses. Democratic lawmakers pushed back against the proposal, saying that it is an excuse to undercut regulation and underfund the agency.
Former SEC chairman Arthur Levitt Jr. told the Washington Post that Bachus’ proposal would be more like an “evisceration” for the agency