Mandatory Audit Rotation
Arguments in Favour of Mandatory Audit Rotation:
As an attempt to strengthen the audit independence and the audit quality, mandatory audit rotation is to be considered as a very good proposal to safeguard the audit independence. It is, however, limited number of years above that the audit firm or the engagement partner (For instance, the U.K. approach is to change only the engagement partner. While in the U.S. approach it is mandatory to change the whole audit firm) can no longer be or continue as the auditor of a company. However, as an attempt to analyse the proposed safeguard there should be some arguments considered whether these arguments favour the mandatory rotation or they are against it. Bear in mind that this paper will include three pros to audit rotation and three cons to it. Firstly, individuals who support the MAR, has chosen it for some reasons and that is why they prefer the particular safeguard. The well-known and the most important advantage of audit rotation according to Bakshi is that the auditor will know that they will be changed anyway; therefore, they are less likely subjected to the management pressure in which case the independence level will increase (Bakshi, 2004). The author means that the auditor rotation would overcome the main threats of the independence (self-interest threat, management threat…) if he or she knows that they are going to be changed anyhow. In this case the author considers the mandatory audit rotation (MAR) to protect and safeguard the auditor independence because the independence is the most important block on which the credibility is built upon. The auditor is all about the credibility because if the members lose the faith in the audit firm it would become nonsense having an audit firm. However, the auditor main goal is to maintain the independence in order to have a credible opinion. Moreover, a second argument in favour of mandatory audit firm rotation, according to (Raiborn, C. et all. 2006), is that it would
As an attempt to strengthen the audit independence and the audit quality, mandatory audit rotation is to be considered as a very good proposal to safeguard the audit independence. It is, however, limited number of years above that the audit firm or the engagement partner (For instance, the U.K. approach is to change only the engagement partner. While in the U.S. approach it is mandatory to change the whole audit firm) can no longer be or continue as the auditor of a company. However, as an attempt to analyse the proposed safeguard there should be some arguments considered whether these arguments favour the mandatory rotation or they are against it. Bear in mind that this paper will include three pros to audit rotation and three cons to it. Firstly, individuals who support the MAR, has chosen it for some reasons and that is why they prefer the particular safeguard. The well-known and the most important advantage of audit rotation according to Bakshi is that the auditor will know that they will be changed anyway; therefore, they are less likely subjected to the management pressure in which case the independence level will increase (Bakshi, 2004). The author means that the auditor rotation would overcome the main threats of the independence (self-interest threat, management threat…) if he or she knows that they are going to be changed anyhow. In this case the author considers the mandatory audit rotation (MAR) to protect and safeguard the auditor independence because the independence is the most important block on which the credibility is built upon. The auditor is all about the credibility because if the members lose the faith in the audit firm it would become nonsense having an audit firm. However, the auditor main goal is to maintain the independence in order to have a credible opinion. Moreover, a second argument in favour of mandatory audit firm rotation, according to (Raiborn, C. et all. 2006), is that it would