SEC© plans to force companies to disclose auditor tenure

Publisher: Marketwatch
Author: Francine McKenna

The US Securities and Exchange Commission thinks it can do what the audit regulator, the Public Company Accounting and Oversight Board (PCAOB) could not — require companies and their auditors to disclose the tenure of their client relationship, the Financial Times reported on Sunday.

A London based reporter credits Joseph Carcello, an accounting professor at the University of Tennessee and a member of the SEC’s investor advisory committee, for the tip. One corporate governance expert at a U.K. fund house is quoted anonymously saying tenure at companies like Procter & Gamble, where Deloitte has been the auditor since 1890, are “ridiculous.” Other U.S. examples cited were Caterpillar, the heavy equipment company, which has used PwC for 90 years, and Goldman Sachs, which has employed PwC for 89 years.

Investors scrutiny of auditor independence has increased after the financial crisis, especially in the U.K and Ireland where leaders of the big four accounting firms (PwC, Deloitte, Ernst & Young and KPMG) appeared before legislators to answer how they either failed to spot or failed to highlight huge problems in the banking sector. No such hearing has ever been held in the U.S.

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