04-18-2007, 06:15 PM
Regulators should be aiming to extend the rotation period to at least seven years, according to auditors
Nicholas Neveling, Accountancy Age, 12 Apr 2007
Rotating audit engagement partners on a regular basis has been a pet topic of the Professional Oversight Boardâs audit inspection unit, with the watchdog arguing that engagement partners need to be moved along to ensure independence.
"Professional Oversight Board (POB)" chairman Sir John Bourn has spoken out about the âinsufficient use of databases to monitor the length of relationships between audit engagement partners and clientsâ and warned that too cosy a relationship between partner and client places audits at risk.
This week, however, auditors gave their firmest indication yet that rather than enforcing the five-year rotation rule meticulously, regulators should be aiming to extend the period to at least seven years.
Responding to the Financial Reporting Councilâs discussion paper on promoting audit quality, Grant Thornton, ICAS and Deloitte were among the many respondents who said the rotation period should to be extended to seven years.
âExisting rotation requirements may inadvertently have a negative impact on audit quality because key audit partners are removed without always having someone to replace them,â said ICASâs James Barbour.
Deloitteâs Martyn Jones said extending the rotation period was highly unlikely to compromise auditor independence.
âChief executives and financial directors are more mobile and less likely to see out five years at a single company, which reduces the risk of a relationship becoming too close,â he said.
Nicholas Neveling, Accountancy Age, 12 Apr 2007
Rotating audit engagement partners on a regular basis has been a pet topic of the Professional Oversight Boardâs audit inspection unit, with the watchdog arguing that engagement partners need to be moved along to ensure independence.
"Professional Oversight Board (POB)" chairman Sir John Bourn has spoken out about the âinsufficient use of databases to monitor the length of relationships between audit engagement partners and clientsâ and warned that too cosy a relationship between partner and client places audits at risk.
This week, however, auditors gave their firmest indication yet that rather than enforcing the five-year rotation rule meticulously, regulators should be aiming to extend the period to at least seven years.
Responding to the Financial Reporting Councilâs discussion paper on promoting audit quality, Grant Thornton, ICAS and Deloitte were among the many respondents who said the rotation period should to be extended to seven years.
âExisting rotation requirements may inadvertently have a negative impact on audit quality because key audit partners are removed without always having someone to replace them,â said ICASâs James Barbour.
Deloitteâs Martyn Jones said extending the rotation period was highly unlikely to compromise auditor independence.
âChief executives and financial directors are more mobile and less likely to see out five years at a single company, which reduces the risk of a relationship becoming too close,â he said.
