An Empirical Analysis of the Effects of Audit Rotation Policies on Financial Reporting Integrity and Credibility

Posted: Nov 11, 2022

• Scarlett Scott
• Scarlett Thomas
• Scarlett Young

Abstract

The integrity of financial reporting represents a cornerstone of efficient capital markets and investor confidence. Audit rotation policies have emerged as a prominent regulatory mechanism aimed at enhancing auditor independence and, by extension, financial reporting quality. While the theoretical rationale for audit rotation is well-established in agency theory and regulatory frameworks, empirical evidence regarding its effectiveness remains mixed and context-dependent. This research addresses critical gaps in the existing literature by conducting a comprehensive multi-jurisdictional analysis that transcends the conventional binary approach to rotation policy evaluation. Traditional studies have predominantly focused on mandatory audit firm rotation as a singular intervention, often yielding contradictory findings.