Mandatory Audit Firm Rotation and Its Implications on Maltese Listed Entities

Kyra Damato, Lauren Ellul, Peter. J. Baldacchino, Norbert Tabone and Simon Grima

International Journal of Finance, Insurance and Risk Management, 2024, vol. 14, issue 3, 139-171

Abstract: Purpose: This paper has three objectives: (i) to examine the perspectives of Maltese Listed Entities (MLEs) and their external auditors (EAs) on the perceived effects of the implementation of the EU measure of Mandatory Audit Firm Rotation (MAFR); ((ii) to pinpoint and analyse which major audit factors have or have not been affected by such implementation; (iii) to determine whether the particular objectives of the European Union (EU) Audit Reform, which ultimately mandates MAFR for MLEs, are thus being fulfilled. Design/Methodology/Approach: The study adopts a qualitative research methodology. Semi-structured interviews were conducted with twenty-five participants, these consisting of fifteen representatives from MLEs, five EAs from Big-Four firms and five EAs from mid-tier firms., financial transparency, audit supervision and coordination are deemed unaffected by MAFR. The objectives of this European Union measure are thus not being completely fulfilled in Malta. Findings: The findings indicate that MLEs generally demonstrate a favourable disposition towards MAFR, although a divergence of opinions regarding its necessity persists. On their part, EAs also exhibit support towards MAFR, perceiving it as essential for MLEs despite posing resource challenges for mid-tier auditors. Both MLEs and EAs recognise MAFR’s role in improving client-auditor relationships, triggering knowledge disruption and increasing audit fees. Practical Implications: While MAFR is having minimal impact on audit quality and auditor independence, it enhances audit market competition, particularly among Big-Four firms, and also strengthens professional scepticism. Originality/Value: The originality of this research lies in its focus on raising awareness on the implementation of the European Union measure of MAFR within the unique context of smaller states like Malta, thus providing valuable insights into its applicability for listed companies, their auditors and other stakeholders in similar environments.

Keywords: Mandatory Audit Firm Rotation; Maltese Listed Entities; European Union Audit Reform; External Audit. (search for similar items in EconPapers)
JEL-codes: G18 G34 K22 M42 (search for similar items in EconPapers)
Date: 2024
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://journalfirm.com/journal/411/download (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ers:ijfirm:v:14:y:2024:i:3:p:139-171

Access Statistics for this article

More articles in International Journal of Finance, Insurance and Risk Management from International Journal of Finance, Insurance and Risk Management
Bibliographic data for series maintained by Marios Agiomavritis ().