Audit Integrity and Job Protection Act

Floor Speech

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Mr. MEEKS. I want to thank the gentlelady from California for all of her hard work.

I rise to support H.R. 1564, which I cointroduced with my colleague, the gentleman from Virginia (Mr. Hurt). This bill will ensure we maintain strict auditing standards without imposing overly burdensome and ill-conceived rotation requirements on our public companies.

I also want to point out the hard work the gentlelady from California put in with regards to the GAO study and why it is important so that we can continue to make sure that our markets are strong and sturdy; and that amendment, as she so indicated, is what enabled us to have a unanimous agreement coming out of our committee. It was us working together across the aisle to make sure that that happened. I think it was good for our markets. It helps to remove the uncertainty that the markets certainly would have right now had we not had this removed and had this study going forward.

I think it's important for me to emphasize that this bill does not, first, weaken our auditing and accounting standards which were reinforced 10 years ago under the Sarbanes-Oxley Act, and that this bill does not weaken--nor do I want to weaken--or remove the regulatory powers of PCAOB, but we do want to remove the uncertainty.

This bill does not, in any circumstance, provide an opportunity for more fraudulent accounting gimmicks. In fact, I want to remind my colleagues that we have supported and we have enacted here in the United States one of the toughest pieces of legislation against accounting fraud and that our existing laws already embrace the concept of rotation by requiring the replacement of the lead auditing partner. This selective rotation ensures that the opinions and interpretations of the reviews remain unbiased and do not remain under the authority of the same individual for prolonged periods. This provision puts us ahead of most developed countries when it comes to antifraud accounting rules, and I believe that it remains the right and smart approach.

Imposing mandatory rotation of the entire auditing firm in the industry where companies often have none or, at best, one or two credible options to rotate to is simply unworkable, it is disruptive, and it imposes undue expenses on our public companies. In fact, studies conducted here in the United States show that requiring mandatory rotation would increase cost by 20 percent in the subsequent year and an additional 17 percent cost for selection process alone. In addition to cost, it is possible that it may actually force public companies to select less credible auditing firms that may not have the required expertise, or it may encourage the auditing firm to charge excessively high fees because mandatory rotation may impose the selection of the single remaining qualified auditing firm.

Mr. Speaker, as I stated before, we did not introduce this bill simply because we're against the principle of rotation; but, rather, we introduced this bill because imposing rotation at all costs, by any means, regardless of market conditions, would simply be irresponsible and detrimental.

Many of my colleagues, me included, do favor a more competitive auditing industry where companies can have more choices in selection of their auditing firms. Eventually, market conditions may evolve and we may have new auditing firms that emerge and gain the confidence of marketers and investors. As that happens, firm rotation, I believe, will naturally happen through market forces, but not through legislation. It is for that reason, Mr. Speaker, that I urge my colleagues to vote in support of H.R. 1564 and to support this commonsense regulation of our auditing industry.

I thank both the chairman and the ranking member and my colleague, Mr. Hurt, who cosponsored this, for bringing this piece of legislation forward.

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