Accounting and Auditing Oversight: Pending Proposals and Emerging Issues Confronting Regulators, Standard Setters and the Economy
Congresswoman Waters delivered the following opening statement during a hearing on Accounting and Auditing Oversight.
Thank you, Mr. Chairman, for holding this hearing this morning.
Investors in my district – including workers with investment in pension funds – have a strong interest in enhancing auditor independence. After all, it's the auditors that are supposed to reassure investors that they can trust the financial reports of the companies they've given their life savings to.
How we can achieve more auditor independence is obviously a subject for debate, and I appreciate that the PCAOB has put out its concept release on auditor rotation, and held public meetings last week, to get this conversation started.
While I certainly think that we must explore ways to enhance auditor independence, I'm interested in understanding the issue of mandatory audit rotation more fully, whether it would work, or whether there might be better alternatives than mandatory rotation. For example, should shareholders perhaps be allowed a proxy vote to determine if they'd like to have mandatory audit rotation? Are there other measures that might increase professional skepticism more than rotation would?
However, even if stakeholders come to the conclusion that mandatory rotation is a good idea, I don't think anyone believes that it would come close to resolving all of the outstanding barriers to auditor independence. So I am eager to explore the other ideas brought forward by our witnesses today.
Finally, I would also like to note that I've been focused on ensuring that auditors are adequately independent and skeptical under the OCC and Federal Reserve's mortgage servicing consent order process. Under that process, banking regulators required servicers to hire auditors to investigate their foreclosure practices over the last few years, and to provide remediation to affected borrowers.
We've found that auditors often have other lucrative engagements with the servicers they've been hired to investigate, perhaps creating a disincentive to find wrongdoing when it comes to looking at their foreclosure practices. So along with Senator Menendez and some of my colleagues from the House, I've asked the GAO to look into this issue.
There are also other issues I hope we get to today, including the role of audit committees, whether to make PCAOB disciplinary proceedings public, and certain accounting issues. I look forward to hearing the testimony of our witnesses today.
Thank you, I yield back the balance of my time.