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PwC's Chairman Blasts Mandatory Auditor Rotation

New York (Nov. 25, 2002) — While he supports regular partner rotation on audit clients, PricewaterhouseCoopers' U.S. chairman said mandatory rotation of audit firms will hurt the quality of audits.

During an audit committee forum last week, Nally called the idea a “simplistic solution” and said the firm sees “no benefit to be gained by a disruptive mandatory rotation of audit firms.”

The contentious issue of mandatory auditor rotation has been proposed by members and critics of the profession who contend that long-term relationships between auditors and clients lead to cozy relationships that present conflict of interest issues. The idea has been widely criticized by members of the profession who agree that it would decrease audit quality.

“If audit firms were to be continually rotated, the valuable knowledge and insight that each audit firm gained would simply vanish — and the detrimental effect on audit quality would be repeated on a regular basis,” Nally said. “Under such a system, the major victim of forced rotation would be the company's shareholders and the investing public.”

Nally also noted that PwC is seeing an average increase in audit fees of 25 percent to 30 percent, prior to the additional work required by auditors to address provisions of Sarbanes-Oxley.

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