The United States’ Securities and Exchange Commission last month approved rules requiring companies to disclose how long their auditor has been on the job in a bid to break up long-lasting auditing relationships, reported the Financial Times. U.S. audit reports will also have to include “critical audit matters” (CAMs), which will give shareholders insight into the specific issues that made a material difference to financial statements.
“This is going to have a direct impact on the audit profession: accountability,” Public Company Accounting Oversight Board Chairman James Doty told the FT. “Changes may not occur overnight, but they will occur.”
The U.S. is the latest to take steps to achieve audit transparency, with the European Union already requiring companies to put their audit contracts up for bids every 10 years.
According to the newspaper, all but three of the 500 largest companies in the U.S. use the Big Four, and many of them have used the same firm for decades. Critics say such long-term relationships lead to auditors losing their scepticism.