Exploring the Effectiveness of Audit Firm Rotation in Maintaining Auditor Independence and Objectivity
Posted: Sep 13, 2023
Abstract
The preservation of auditor independence stands as a cornerstone of financial reporting integrity and capital market confidence. Regulatory bodies worldwide have grappled with the challenge of designing effective mechanisms to safeguard auditor objectivity against the multifaceted threats that emerge in long-term auditor-client relationships. Mandatory audit firm rotation has emerged as a prominent policy response to address concerns regarding familiarity threats, economic dependency, and the potential erosion of professional skepticism over extended engagement periods. This research undertakes a comprehensive examination of rotation effectiveness through an innovative computational framework that transcends traditional empirical approaches.
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