Which of the following statements correctly describes the 'cooling-off' period for a lead audit partner of an issuer under Sarbanes-Oxley and PCAOB rules?

Answer options:

The partner must rotate off the engagement after 7 years and cannot return for 2 years.

The partner must rotate off the engagement after 5 years and cannot return for 5 years.

The partner must rotate off the engagement after 5 years and cannot return for 2 years.

There is no mandatory rotation if the audit committee approves.

How to approach this question

Memorize PCAOB Rotation: Lead/Concurring = 5 years on, 5 years off. Others = 7 years on, 2 years off.

Full Answer

B.The partner must rotate off the engagement after 5 years and cannot return for 5 years.✓ Correct

The partner must rotate off the engagement after 5 years and cannot return for 5 years.

Under PCAOB rules (and SOX), the lead engagement partner and the concurring review partner must rotate off the engagement after 5 consecutive years of service and are subject to a 5-year 'time-out' or cooling-off period.

Common mistakes

Confusing the 5-year rule (Lead) with the 7-year rule (Other partners).

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