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Debate continues over auditor independence and audit firm rotation

 

March 19, 2012

On Wednesday and Thursday, what’s likely to be a robust discussion on audit firm rotation for public companies in the United States kicks off. Meanwhile, markets will get a glimpse of the U.S. housing situation, and FASB and the International Accounting Standards Board (IASB) will meet in London to discuss insurance contracts Tuesday.

U.S. audit firm rotation

One of the most hotly contested issues in accounting and auditing will be debated when the PCAOB holds an open meeting on auditor independence and audit firm rotation on Wednesday and Thursday in Washington.

The PCAOB’s Aug. 16 concept release asked stakeholders to consider mandatory audit firm rotation as a means to bolster auditor independence and skepticism. Critics, including the AICPA, have raised concerns about mandatory rotation, citing studies that conclude rotation is costly for companies and has the potential to hinder audit quality.

Former U.S. Comptroller General Charles Bowsher, former SEC Chairman Richard Breeden, and former Federal Reserve Chairman Paul Volcker will open the meeting, which will be available via webcast on the PCAOB’s site, at 8:30 a.m. EDT Wednesday. Business leaders, including directors from Dell Inc. and SanDisk Corp., will join public accounting and audit firm CEOs and educators on the roster of speakers.

The comment period has been extended until April 22; comments can be sent from the PCAOB’s website or emailed to comments@pcaobus.org.

Insurance contracts

Insurance contracts will be discussed beginning at 9:30 a.m. EDT Wednesday at a joint meeting of FASB and the IASB.

The boards will discuss the unit of account to be applied in certain aspects of measuring the insurance contract liability, and the separation of investment components from insurance contracts. The session will be available via webcast.

Insurance contracts are among the subjects on which the boards are trying to reach convergence. FASB Chairman Leslie Seidman said in a webcast recently that the boards have struggled to reach consistent conclusions about several components of the insurance project, but continue to try to resolve differences.

FASB also will hold an education session on its project to determine a consistent definition of a nonpublic entity at about 2:40 p.m. EDT Wednesday. That meeting also will be available via webcast. More information is available on FASB’s calendar.

U.S. housing

Important data on the U.S. housing market arrives this week. The housing industry, a broad barometer of the nation’s economy, has shown some signs of movement following a lethargic 2011. But will sales, prices, new homes, and optimism continue to increase?

  • On Tuesday, the Census Bureau will release data on February housing starts. Building permits issued for privately owned homes increased 19% in January, compared with the same month a year earlier. That data will come a day after Monday’s release of the NAHB/Wells Fargo Housing Market Index, which showed that builder confidence has leveled out at a four-year high, following five straight months of increases.
  • On Wednesday, the National Association of Realtors will release February data for sales of existing homes. In January, sales were up 0.7% compared with the same month a year ago.
  • On Thursday, the Federal Housing Finance Agency House Price Index will shed light on February home prices. Home prices, which have been on the rise in recent months, are among the double-dip indicators economists will keep an eye on.
  • And on Friday, the Census Bureau will release figures on new home sales for February. New home sales were up 3.5% in January, compared to the same month a year ago.


For a look at upcoming international economic indicators and management accounting events, visit CGMA Magazine.

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