Does the rotation of auditors improve the quality of auditing?

Does the rotation of auditors improve the quality of auditing? Essay example
Finance & Accounting
Pages 7 (1757 words)
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Does The Rotation Of Auditors Improve The Quality Of Auditing? As the economy of the United Kingdom struggles to recover from the recent financial crisis marked by mortgage defaults, high rates of unemployment, corporate scandals and overall lack of investor confidence, there has been a growing debate on the need to improve transparency, accountability, trust and credibility.


In the provisional report released by the panel, it was proposed that, for there to be audit quality, audit firms must be rotated periodically (Whitehouse par. 4). This proposal by the U.K. Competition Commission is in line with the United States Public Company Accounting Oversight Board’s (PCAOB) concept, which proposed compulsory rotation of audit firms. According to PCAOB, the proposed regulation would set a threshold on the number of years that a registered public audit firm could act as the auditor of a public company, noted Bhika and Francis (par. 2). This proposal came about out of the increasing need to improve audit quality in both the U.K. and the U.S. Audit quality, according to Arter (3) is a process involving a systematic examination of internal and external auditor’s quality system. Audit quality is seen as an important part of quality management system in an organization. Quality audit ensures that audit companies perform their duties objectively, and independently. Therefore, the U.K. Competition Commission and PCAOB believe that rotation of auditors of public companies will help increase competition among audit firms, which will also increase the quality of audit. ...
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