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Does the rotation of auditors improve the quality of auditing - Essay Example

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Does the rotation of auditors improve the quality of auditing

Rotation of auditors has also been argued to facilitate business organisations in developing better transparency in their financial reports. Moreover, auditor rotation is identified as a process assisting in better flow of information. Rotation also ascertains that the financial statements of a business organisation are reviewed frequently. In this manner, auditor rotation develops an increased accountability along with independence amid auditors. However, the policy of auditor rotation is identified to affect the audit quality to a substantial extent, as auditors with time span are aware of the risks and credibility that a business organisation is attached with. It is also ascertained that there are certain business organisations adopting the policy of auditor rotation, which are seemed to increase complexities as well as cost due to rotation during important business transactions (Whitehouse, 2013). In this regard, the essay emphasizes the audit quality and the policy of rotation of auditors. Moreover, the essay discusses about the issues that are addressed by auditors’ rotation and explains the advantages and disadvantages associated with the policy of auditors’ rotation. Discussion Defining Audit Quality In the present business scenario, financial reports of companies are deemed to be quite essential elements of identifying the performances of business organisations. In this regard, both internal as well as external auditors play effective role in the preparation of financial reports suitably (Arrunada & Paz-Ares, 1997). Contextually, audit quality has emerged as an important aspect in relation to the audited financial reports that are prepared and presented. It is therefore deemed to be the auditors’ responsibility to discover as well as identify the shortcomings in the accounting system of an organisation in order to ensure that financial reports are prepared systematically and appropriately (Velte & Stiglbauer, 2012). Correspondingly, the policy of audit quality is generally argued as based on three important factors, which include disclosure of appropriate financial statements, ascertaining that the internal control system of an organisation is efficient and provide adequate warnings in case of frauds and misrepresentations (PCAOB, 2013). The Issue that are Addressed by ‘Rotation of Auditors’ The policy of rotation of auditors is thereby adopted by business organisations with the objective of ascertaining that financial reports are prepared and disclosed appropriately ascertaining better audit quality. The policy has been adopted in order to minimise the barrier of over-familiarity that may develop amid the management of an organisation and auditors with time. In this respect, business organisations have adopted this policy in order to safeguard and protect the interests as well as confidence of investors by ensuring that quality audited financial reports are disclosed every year, representing a reliable information reflecting the current financial position of the company. The utmost objective of rotation of auditors is accordingly, to ascertain that auditing operations are performed effectively in order to enhance audit quality (PWC, 2013). In this regard, it can be comprehended ...Show more

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Does the Rotation of Auditors Improve the Quality of Auditing? Table of Contents Introduction 3 Discussion 4 Defining Audit Quality 4 The Issue that are Addressed by ‘Rotation of Auditors’ 4 Meaning of ‘Rotation of Auditors’ 5 Advantages of ‘Rotation of Auditors’ 6 Recommendations 11 Conclusion 11 References 12 Introduction Rotation of auditors implies to the regulatory decision that audit firms will be limited on the basis of years for which they will perform audit operations for a particular entity in the corporate sector…
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