Audit Firm Perspective on Enhancing Independence - Evidence from PCAOB Comment Letters

• In Event: Public Interest

Abstract

In this study, we analyze audit firm comment letters written in response to the PCAOB’s 2011 Docket No. 37 entitled “Concept Release on Auditor Independence and Audit Firm Rotation.” The intent is to provide a synthesis of perspective from the largest American auditing firms on improving independence, objectivity, and professional skepticism. While auditor rotation has manifested itself as the central tenor in the independence discussion, addressing rotation was not the only goal of the aforementioned concept release. Another objective of the release was to spur thought on alternative concepts that might increase professional skepticism and auditor independence. As such, this study dissects and summarizes seventy firm-sponsored alternative solutions contained in their respective responses to the PCAOB. Those alternative solutions are then divided into three categories: audit committee effectiveness, firm quality control, and regulation. Accordingly, the unique contribution of this study is the dissemination of the practitioner responses to the PCAOB’s request for alternatives to curb maligned independence, objectivity, and professional skepticism. Discussion of these suggestions has important practical implications for regulators, audit firms, issuers, and academicians.

Authors

• Tyler Williams, University of Mississippi

• W. Mark Wilder, University of Mississippi