The U.S. House of Representatives passed the Audit Integrity and Job Protection Act, H.R. 1564, by a vote of 321 – 62 on July 8, 2013. The bill would prohibit the Public Company Accounting Oversight Board (PCAOB) from requiring mandatory audit firm rotation.
In a statement issued following the House action, Barry C. Melancon, CPA, CGMA, president and CEO of the American Institute of CPAs (AICPA) said, “In the absence of evidence that mandatory audit firm rotation would enhance audit quality, the House has sent regulators in the United States and Europe a clear message that the time has come to end the debate over rotation. Today's House vote will go a long way toward alleviating confusion and uncertainty for policy makers and stakeholders on both sides of the Atlantic. I want to thank the measure's co-sponsors, Representatives Robert Hurt of Virginia and Gregory Meeks of New York, as well as its many congressional supporters.”
On the eve of the vote, the AICPA sent a letter to all House members stating that, “It is clear from the record that such a requirement would be costly and likely have significant negative impacts on audit quality with uncertain benefits. Among the most notable comments is a letter from the GAO [U.S. Government Accountability Office] in which it comments, ‘Even if the PCAOB could clearly establish that a lack of independence or objectivity is causing audit quality problems, it is unclear that such a problem would be prevented or mitigated by a mandatory audit firm rotation requirement.’”
The floor vote followed a June 19, 2013 vote by the House Financial Services Committee of 52 – 0 in favor of the legislation. In his opening statement at the committee hearing, Chairman Jeb Hensarling (R-Texas) said, “It is boards of directors, management and shareholders who should ultimately make the decision about which accounting firms should audit a company's financial statements – not the PCAOB.”
The AICPA’s letter observed that the legislation reflects the overwhelming consensus on mandatory rotation in the United States. “We firmly believe mandatory rotation is not in the public interest, risks harm to audit quality, would impose significant costs on businesses and shareholders without commensurate benefit, would be economically disruptive and create other negative consequences. For these reasons, we support the passage of H.R. 1564,” it stated.
In addition, 30 state CPA societies whose states are represented on the House Financial Services Committee weighed in with their representatives in support of the bill.