MANDATORY ROTATION OF AUDITORS
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|MANDATORY ROTATION OF AUDITORS
In light of a number of high-profile corporate failures during the first half of 2001, a number of studies have been performed to address the impact of mandatory rotation of audit firms to ensure the appropriate level of ‘independence’ of auditors. Majority of studies conclude that the detrimental effects of firm rotation on the quality of the audit work by far outweigh its positive effects as a safeguard against various independence and quality threats.
Frequent changes of audit firms, whether resulting from mandatory rotation or otherwise, introduce threats to independence and operational difficulties that make audit failure more likely. Many studies have involved practitioners’ opinions on this issue, which have been based on their experiences and is therefore necessarily more subjective than from impartial, third party studies. There are differing opinions, as some audit firms wish to preserve the client bases, while others welc...
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