Assessing the Influence of Audit Partner Rotation on Auditor Objectivity and Independence

Posted: Jul 09, 2016

• Nico Ramirez
• Luca Simmons
• Eleanor Ford

Abstract

The mandatory rotation of audit partners represents a cornerstone of regulatory efforts to preserve auditor independence and enhance objectivity in financial statement audits. While the theoretical justification for rotation policies is well-established in agency theory and regulatory frameworks, empirical evidence regarding their effectiveness remains mixed and methodologically constrained. Traditional research approaches have predominantly relied on financial restatements, audit fees, and discretionary accruals as proxies for audit quality, with limited direct measurement of the behavioral and cognitive factors underlying auditor objectivity. This study introduces a novel computational framework that addresses this methodological gap by analyzing the linguistic and procedural evolution of audit processes across rotation cycles. Our research is motivated by the recognition that auditor objectivity operates through complex cognitive processes and professional judgments that are not fully captured by traditional financial metrics. The rotation of audit partners creates natural experiments in professional relationship dynamics, providing unique opportunities to observe how changes in key personnel influence audit approach, skepticism, and independence.