Posts Tagged ‘Mandatory Audit Firm Rotation’

Most Popular NACD Blog Posts of 2012

December 28th, 2012 | By

Here are some of 2012’s most popular NACD Blog posts as measured by unique page views.

  1. Self-Reflection: Three Questions Boards Must Answer. Three essential questions drive the assessment process.
  2. PCAOB Weighs Pros and Cons of Mandatory Audit Firm Rotation. Alex Mandl, chairman of Dell’s audit committee, spoke on behalf of NACD at the PCAOB’s public meeting last March to share the director perspective.
  3. Five Boardroom Deficiencies: Early Warning Signals. At NACD’s Director Professionalism course in Charlotte, N.C., faculty member Michael Pocalyko listed the five boardroom deficiencies he has observed in almost every recent corporate failure.
  4. Undertaking an Honest Self-Assessment: Is Your Board Aligned? How boards conduct the assessments starting with the questions in post #1.
  5. Five Takeaways From Conference. The five takeaways from the 2012 Annual Board Leadership Conference, according to NACD’s Research team.
  6. Alphabet Soup: A Director’s Guide to Financial Literacy and the ABCs of Accounting and Auditing. Alexandra Lajoux’s guide to the seven roadblocks that impede understanding of accounting and auditing standards.
  7. An Update From the SEC. A mid-year update on SEC rules largely affecting the compensation committee.
  8. Five Guiding Points for Directors in the Digital Age of Corporate Governance. Former BD Chairman and CEO Ed Ludwig’s fundamentals for achieving sustainable long-term shareholder value creation.
  9. NACD Spearheads Alternative Solution to Mandatory Audit Firm Rotation. The collaborative effort to develop an alternative solution to PCAOB’s proposed rule mandating audit firm rotation.
  10. PCAOB’s Proposed Mandatory Audit Firm Rotation Misses the Point. NACD President and CEO Ken Daly on why mandating audit firm rotation will not necessarily improve auditor independence and objectivity.

NACD’s Top Five Articles and White Papers of 2012

December 27th, 2012 | By

Read through this year’s most downloaded resources to see what directors found useful in 2012.

  1. Governance Challenges—2012 and Beyond: Featuring the guidance and thought leadership from six of NACD’s strategic content partners, this publication offers a forward-looking perspective on the issues dominating boardroom discussion. Topics covered range from ten to-do’s for audit committees and the basics of compensation to board preparations for crisis situations.
  2. Bridging Effectiveness Gaps: A Candid Look at Board Practices: To combat the risk of asymmetric information, NACD partnered with McGladrey to host four small gatherings—at NACD chapter locations across the nation—of executives and directors in an effort to find ways of improving the communication and relationships between the board and C-suite. From these candid conversations, this white paper was created.
  3. Audit Committee Annual Evaluation of the External Auditor: This tool is the result of a collaborative effort of organizations dedicated to strengthen audit committee performance and transparency. It was also referenced in NACD President and CEO Ken Daly’s remarks during the October 2012 PCAOB Roundtable on mandatory audit firm rotation. This tool is scalable and specifically includes an examination of the auditor’s independence, objectivity, and professional skepticism.
  4. 2012 Risk Oversight Advisory Council Summary of Proceedings: The inaugural meeting of the NACD Advisory Council on Risk Oversight met telephonically during one of the worst hurricanes to hit the eastern seaboard in a century. During the abbreviated meeting, discussion focused on two areas: allocating the work of risk oversight and the new paradigm of reputational risk for corporations today.
  5. 2012 Nominating/Governance Committee Chair Advisory Council Summary of Proceedings: The third annual meeting of the NACD Nominating/Governance Committee Chair Advisory Council reinforced the sentiment that nominating and governance committees are navigating an increasingly challenging environment. The Council focused on how nominating and governance committees are revisiting their director evaluation and succession processes in the context of both new regulations and the rapidly changing global markets.

NACD Spearheads Alternative Solution to Mandatory Audit Firm Rotation

June 22nd, 2012 | By

Next week, the Public Company Accounting Oversight Board (PCAOB) will hold its second public hearing on a proposed rule that would mandate audit firm rotation for all publicly traded companies. One concept the PCAOB has floated is a requirement that public companies rotate audit firms at least every 10 years.

The concept has been floated as a way to address flagging investor confidence in the ability of public audit firms to maintain strict independence.  However, the proposal could have an unintended adverse and far-reaching impact on public companies, not only for directors but also for executives, investors and shareholders.

NACD members across the nation are raising concerns about this concept.  In response, NACD is leading an initiative to engage the corporate governance community and propose an alternative solution—one that allows directors to retain their governance authority while also addressing what the PCAOB perceives to be a lack of investor confidence in the processes by which companies ensure auditor independence.

Audit quality and independence are important issues for directors, and reassuring investor and regulator confidence is a worthy goal.  But in our view, mandatory auditor rotation devalues and undermines the important role boards—and audit committees in particular—play in helping auditors maintain independence, objectivity and skepticism.

In our formal comment letter to the PCAOB, NACD expressed concerns about this proposal on behalf of our members and the entire boardroom community.  We objected to a mandated “one-size-fits-all” solution that would detract from the authority of the audit committee, supplant the board’s governance process and possibly generate unintended risk for the company.

The NACD was not alone in raising questions about the concept. The public comment period triggered a record-breaking volume of comment letters to the PCAOB and vigorous discussion at a roundtable in which NACD participated here in Washington last March.  Several roundtable panelists suggested that NACD was a key source to weigh in on board-level solutions, and the PCAOB noted that it would be receptive to our input.

The NACD Audit Committee Chair Advisory Council is spearheading this initiative, building a coalition comprised of investor representatives (including the Council of Institutional Investors) and the audit profession (including the Center for Audit Quality).   This coalition has a dual mission:

  1. Identify and evaluate with the corporate governance community an alternative solution to mandated regulations on auditor rotation.
  2. Promote this solution within the community and advocate its beneficial effects to the PCAOB and other influencers.

Our goal is to provide our recommendations and rationale to the PCAOB no later than December 2012, in anticipation of the PCAOB finalizing its recommendations in early 2013.

We need your input.  As a first step to formulating an alternative solution to mandatory auditor rotation, we are asking our 12,000 members to offer their own insights on how boards—and audit committees in particular—can apply leading practices to build investor and public trust.

Click here to provide your thoughts through a brief electronic survey. Responses are anonymous and will only be reviewed in aggregate form.

Your participation in this initial survey is a first step in shaping a framework for recommendations that will guide audit committee behavior and actions on matters of auditor independence, objectivity and skepticism.  These recommendations will be shared with the director and investor communities over the course of the coming months.

Ultimately, NACD will deliver these recommendations to the PCAOB by the end of the year, and we will position those concepts as representative of the will and the expertise of the public company directors and boards.

At NACD, we are committed to advancing and promoting best practices of companies to ensure proper board oversight that protects shareholders, investors and employees.