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Results of Compulsory Audit Firm Rotation on Auditor Independence, Audit Quality and Investors’ Confidence

West Precious Awoyeba PhD

Abstract

Compulsory audit firm rotation aims to enhance auditor independence and audit quality by limiting long-term relationships that can lead to familiarity bias, thereby boosting investor confidence in financial statements. While some studies show a positive correlation between rotation and independence/quality, others find a negative Results on the quality of actual audit work due to a loss of client-specific knowledge, and a potential increase in costs. The overall effect on audit quality is a subject of debate, as rotation might increase perceived independence but not necessarily actual audit quality. Arguments for Compulsory rotation Increased

References

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