The Recurring Debate in the United States over Mandatory Firm Rotation

Abstract

ABSTRACT In 2011, the Public Company Accounting Oversight Board initiated a project to consider the imposition of mandatory firm rotation (MFR). While some believe that the idea of MFR began in the 1970s, the present study demonstrates that MFR was first explored during the SEC's investigation of the McKesson & Robbins scandal in the late 1930s. This study provides new insight into the significance of the McKesson & Robbins fraud in terms of its implications for the accounting profession. The possibility of MFR has been considered multiple times since audits of financial statements were mandated by the Securities Acts. The article describes these events, including the circumstances that led to consideration of MFR. The key arguments that arose during the PCAOB's MFR debate are traced to their historical origins.