GAO report says mandatory auditor rotation for SEC companies may not be efficient; loss of knowledge and additional costs outweigh benefits.

• Position: Regulatory matters - General Accounting Office, Securities and Exchange Commission - Brief Article

As directed by Congress in the Sarbanes-Oxley Act of 2002, the U.S. General Accounting Office was required to study the potential effects of mandatory audit firm rotation for companies reporting to the Securities and Exchange Commission. In its study released in Nov. 2003, Public Accounting Firms: Required Study on the Potential Effects of Mandatory Audit Firm Rotation (GAO-04-216), the GAO concludes that "mandatory audit firm rotation may not be the most efficient way to strengthen auditor independence and improve audit quality considering the additional financial costs and the loss of institutional knowledge of the public company's previous auditor of record, as well as the current reforms being implemented." It went on to say, "The potential benefits of mandatory...