US audit firms are fighting back against new rules proposed by the Public Company Accounting Oversight Board (PCAOB) that mandate the establishment of external oversight bodies within the firms.
This rule is part of a broader effort by the PCAOB to update decades-old quality control standards in the industry, aiming to enhance trust in public markets following the Enron scandal. Some firms, like PwC and BDO, already incorporate similar advisory councils into their governance structures. Despite this, they and other large firms, alongside the Center for Audit Quality, are pushing back against the formalization of independent oversight roles.
They argue the PCAOB has not clearly defined how the new oversight should function and are concerned about increased scrutiny and costs associated with the new requirements. The PCAOB, led by Erica Williams, has defended the rule, emphasizing the feasibility of independent oversight and the need for more robust accountability in audit practices.
The Securities and Exchange Commission (SEC) must approve the rule for it to be fully implemented, but the resistance from the industry has caused delays, with the SEC facing pressure to conduct a thorough cost-benefit analysis. The conflict highlights the broader tension between regulatory bodies and the auditing industry over enhancing oversight and accountability.
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