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New control rule aims to enhance audit integrity amid industry resistance
(MENAFN) Gone are the days when corporate executives could dismiss non-executive directors as mere "decorations on the Christmas tree," a practice once famously employed by British businessman Tiny Rowland in the 1980s. Corporate governance reforms have since transformed these board members into crucial elements of market confidence. Today, their roles are not only significant but essential for upholding trust in public markets.
However, American audit firms, integral to maintaining capital market integrity through their auditing functions, are showing reluctance towards formalizing external oversight. A new rule approved by the Public Company Accounting Oversight Board (PCAOB) requires large companies to establish a quality control oversight body with at least one external member. This rule represents a significant overhaul of quality control standards that had been established by the auditing industry decades ago but only recently updated by the PCAOB, nearly 20 years after its formation in response to the Enron scandal.
Despite the new rule's intention to bolster audit integrity, several major firms, including PricewaterhouseCoopers (PwC) and BDO, attempted to overturn it at the last moment. This move has drawn criticism from investor groups, who argue that many companies were already adopting similar external oversight measures. For instance, BDO recently added a second outside member to its Audit Quality Advisory Board to enhance its auditing system, while PwC has advocated for global regulators to facilitate the inclusion of more external members on advisory groups and boards, believing that such diversity in perspectives can improve discussion and decision-making processes.
However, American audit firms, integral to maintaining capital market integrity through their auditing functions, are showing reluctance towards formalizing external oversight. A new rule approved by the Public Company Accounting Oversight Board (PCAOB) requires large companies to establish a quality control oversight body with at least one external member. This rule represents a significant overhaul of quality control standards that had been established by the auditing industry decades ago but only recently updated by the PCAOB, nearly 20 years after its formation in response to the Enron scandal.
Despite the new rule's intention to bolster audit integrity, several major firms, including PricewaterhouseCoopers (PwC) and BDO, attempted to overturn it at the last moment. This move has drawn criticism from investor groups, who argue that many companies were already adopting similar external oversight measures. For instance, BDO recently added a second outside member to its Audit Quality Advisory Board to enhance its auditing system, while PwC has advocated for global regulators to facilitate the inclusion of more external members on advisory groups and boards, believing that such diversity in perspectives can improve discussion and decision-making processes.
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