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Does the rotation of auditors improve the quality of auditing?
Finance & Accounting
Pages 8 (2008 words)
Does the rotation of auditors improve the quality of auditing? Introduction: Recent corporate failures, global economic crisis and the recent global banking crisis have made many governments around the world to introduce auditor’s rotation as mandatory, mainly to achieve auditor’s independence and to increase the external audit’s ambit and quality, to minimise their market concentration and to minimise the peril of fraud.
Australia is collecting more empirical data on the subject to make a decision to make it mandatory or not. India recently envisaged that audit partner should be rotated compulsorily and there should be atleast 50% rotation of the audit team compulsorily. For listed companies, auditor rotation is made compulsory in Portugal on an explain or comply basis. Public companies in Slovenia are given a choice to choose either to rotate partner or audit firm rotation once in five years. Audit partner rotation instead of audit firm rotation is made mandatory by countries like Netherlands, Germany and UK. Administrators in Germany, US and UK are of the view that possible advantages of compulsory rotation of auditors do not overshadow its perils and costs. (Ewelt-Knauer, Gold & Pott 2012:5) The research study will analyse in detail whether the rotation of auditors improves the quality of auditing or not with available literature evidence on the subject. ...
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