The Influence of Auditor Rotation Policies on Auditor-Client Relationships and Audit Independence

Posted: Feb 08, 2023

• Easton Bell
• Maya Jennings
• Avery Rhodes

Abstract

The regulatory landscape governing auditor independence has undergone significant transformation in recent decades, with mandatory auditor rotation emerging as a prominent policy intervention aimed at mitigating the risks associated with prolonged auditor-client relationships. The fundamental premise underlying rotation mandates is that periodic changes in audit firms prevent the development of excessive familiarity and economic dependence that could compromise professional skepticism and audit quality. However, the empirical evidence regarding the efficacy of rotation policies remains mixed, and the nuanced mechanisms through which these policies influence both formal and substantive independence warrant deeper investigation. This research addresses a critical gap in the auditing literature by examining the dual impact of rotation policies on both the structural aspects of independence and the relational dynamics that underpin the audit process.