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House may vote soon on controversial auditor issue

By Dena Aubin

NEW YORK (Reuters) - The U.S. House of Representatives is expected to vote soon on whether an auditor industry watchdog can force companies to switch auditors every few years, breaking up some business ties that have lasted over a century.

Regulators in the United States and Europe have been considering limits to audit firms' terms after auditors failed to warn of problems at banks that failed in the 2007-2009 global financial crisis.

But businesses in the United States pushed back and urged Congress to block any attempts at forcing auditors to rotate.

A bill banning mandatory rotation passed the House Financial Services Committee by a unanimous vote last month and is expected to go to a vote in the full House as soon as Monday, according to lobbyists backing the bill.

The legislation, which lacks sponsorship in the Democratic-controlled Senate, would rein in the U.S. Public Company Accounting Oversight Board, an auditor watchdog group that has had audit firm rotation under debate since 2011.

Backers of rotation said that companies caught up in major accounting frauds often had used the same auditor for many years and had developed a cozy relationship. Auditors are legally required to be independent so they can take a skeptical look at companies' books.

But mandatory rotation is opposed by companies and big audit firms, who said it would raise audit costs and would not improve audit quality.

Dozens of U.S. companies have had the same auditor for 25 years or more. General Electric Co has had the same auditor since 1909 and Procter & Gamble Co since 1890.

The PCAOB was created by the 2002 Sarbanes-Oxley Act, passed to combat accounting fraud and toughen oversight of corporate auditors after the collapse of Enron and WorldCom.

"It is, of course, up to the Congress whether to ban audit firm rotation," PCAOB spokeswoman Colleen Brennan said.

Rotation was one part of a 2011 PCAOB "concept release," or paper seeking comment on how to improve auditor independence and audit quality for companies and investors, "and we continue to explore how best to achieve these goals," she said.

European regulators are considering auditor rotation, and the United States should make its position clear on the issue, a major accounting trade group wrote to the House committee last month.

"Bringing the U.S. debate to a conclusion will alleviate confusion and uncertainty," Barry Melancon, president of the American Institute of Certified Public Accountants, wrote.

"Mandatory rotation is not in the public interest, risks harm to audit quality (and) would impose significant costs," he said.

The Senate has not taken up the issue.

(Editing by Kim Dixon and Matthew Lewis)

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