A proposal to expand the requirements for auditors to identify, evaluate and communicate all company violations of laws and regulations is in direct conflict with existing rules, and it risks undermining audit quality and independence, two House Republican chairmen said Wednesday.
The Public Company Accounting Oversight Board issued the proposed rule in June after a split 3-2 vote. In a letter, House Financial Services Committee Chairman Patrick McHenry (R-N.C.) and Capital Markets Subcommittee Chairwoman Ann Wagner (R-Mo.) urged the board to reconsider. Auditors are not legal professionals and should not be expected to function as law enforcement agents, they said.
“The existing oversight and enforcement frameworks competently address instances of noncompliance,” the lawmakers said. “While auditors have traditionally been responsible for detecting illicit activities as part of financial audits, broadening their purview to encompass noncompliance with all laws and regulations could blur the lines between legal, managerial and audit functions.”
Earlier this month, ABA joined with 20 trade associations to express concerns about the proposal, saying the language in the rule was vague and threatened to turn routine audits into wide-ranging investigations. “This would not only blur responsibility between the legal, management and audit functions, but would also divert auditors’ time, attention and resources away from auditing financial statements,” the groups said.