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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? BY YOU YOUR SCHOOL INFO HERE DATE HERE Does the rotation of auditors improve the quality of auditing? Introduction It is a highly contested issue as to whether rotation of auditors actually maintains the ability to improve auditing quality.
Based on all conjecture about such rotations and research studies on auditing tenure versus rotation, it would appear that the quality of auditing is actually improved by rotating auditing firms. The evidence Pozen (2012) argues that when an organisation decides to rotate auditors, there is the need for significant investment on behalf of the new auditing firm to gain important institutional knowledge about the industry which has already been learned by the incumbent auditing firm. Research studies have illustrated that there is reduced quality in auditing practice and competency during the initial years of appointment as the new auditing firm attempts to familiarise itself with specific business practices (Pozen 2012). Especially apparent in multi-national firms, new auditing companies must learn highly extensive information about corporate finance and accounting in a complex, global accounting environment. This requires time and perhaps even training, however once this information is gleaned, the auditor can provide better quality audits even though this quality took considerable time to develop and enhance. ...
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