The audit mandatory rotation rule: the state of the art

Mara Cameran, Giulia Negri and Angela Pettinicchio
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Mara Cameran: Università Luigi Bocconi
Giulia Negri: SDA Bocconi School of Management
Angela Pettinicchio: Università Luigi Bocconi

Journal of Financial Perspectives, 2015, vol. 3, issue 2, 61-75

Abstract: Mandatory audit rotation imposes periodical breaks to audit engagements and is intended to avoid excessively long relationships between the auditor and the client. The E.U. has finally introduced mandatory rotation for the audit firm in addition to the already existing audit partner rotation rules. The U.S., however, has for now decided to retain the partner rotation rule without introducing mandatory audit firm rotations. After an overview of the experience of a number of countries, we summarize the pros and cons of a compulsory change in the audit firm. Moreover, we focus on the empirical evidence collected on the benefits and costs of the rule. So far, investigations into the impact of the rule at corporate and market level have not been able to prove that the benefits outweigh the costs.

Keywords: Audit; audit firm rotation (search for similar items in EconPapers)
JEL-codes: G10 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (5)

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