(37) Why, then, has it taken over three decades for MAFR to be seriously considered as a method of regulating public company audits?
(43) However, aside from this limited discussion and foreshadowing of MAFR proponents' arguments, the Committee made no substantial recommendations regarding the viability of MAFR.
(52) After reviewing the concept of MAFR, the Cohen Commission argued that MAFR's benefits would be counteracted and outweighed by the costs of such a regulatory scheme.
(65) Among other things, this Act required the Comptroller General to complete a study of the costs and benefits of implementing MAFR. (66) A call for research of MAFR ultimately became part of Sarbanes-Oxley.
(68) Conceptually similar to MAFR, audit partner rotation prevents an audit partner from overseeing a company's audit if the partner has worked on the company's audit anytime in the prior five fiscal years.
The research performed by the General Accounting Office (GAO) in 2003 and provided to the Senate Committee on Banking, Housing, and Urban Affairs and the House Committee on Financial Services ultimately determined that MAFR "may not be the most efficient way to strengthen auditor independence and improve audit quality." (70) In reaching this conclusion, the GAO divided its investigation into three areas.
The majority of survey respondents in the subgroups examined and "other knowledgeable individuals" indicated that the benefits attributed to MAFR will be obtained through the reforms already required by Sarbanes-Oxley and the SEC, namely audit partner rotation.
MAFR is a particular concern for the PCAOB because of the "significant inherent risk" associated with asking audit firms to independently examine their income source, the client.
Although the PCAOB expressed its desire for comment from the public regarding MAFR, it openly asserted its opinion that MAFR could increase auditor accountability.
THE THEORETICAL BENEFITS, AND THE UNDENIABLE COSTS, OF MAFR
Though a variety of arguments have been posed in favor of MAFR over the years, three arguments, in particular, warrant further discussion: (1) the "fresh eyes/fresh look" argument; (104) (2) the "auditor coziness" argument; (105) and, (3) the "watchdog" argument.
The Cohen Commission report, though it did not endorse MAFR, recognized that one of the main arguments cited in favor of MAFR is that it would usher in "a fresh viewpoint" to review the public company.