Audit Essay Example | Topics and Well Written Essays - 2250 words

Audit - Essay Example Recent news that European Parliament has voted for bringing mandatory auditor rotation into the EU region has once again reminded to the global society about the necessity to improve auditor’s independence and stressed the importance of this measure. The aim of this research was to provide an overview of the auditor's independence and the mandatory auditor rotation and to analyze whether compulsory auditor rotation will improve the overall auditor independence and audit quality. Under mandatory auditor rotation, it is understood that a business or a client firm should not retain the same auditor for more than a specified period of time. There are many different views and opinions regarding the correlation between auditor's independence and auditor rotation reforms. While some experiments published in the accounting literature indicate on some potential benefits of this measure, other studies illustrate that there is no positive effect for auditor rotation and moreover, it may cause the adverse effect. The majority of opponents believe that mandatory audit firm would not improve audit quality, but will result in increased time and distraction of management, as new auditors will require more time for understanding company’s business practices, operations, and financial reporting processes. While there are proponents of mandatory audit rotation, stating that this measure will enable to improve auditors’ independence, the number of arguments put forward by the opponents of this idea is much greater.