Audit Quality and Auditor Switching: Some Lessons for Policy Makers
25 Pages Posted: 6 Sep 1998
This paper reviews the literature on audit quality and auditor switching to assess different countries policy regimes. It argues that policy-makers should limit managerial influence over auditor switching rather than reduce auditors' economic dependency on clients. In particular, the paper advocates proper communication between shareholders and auditors, and a policy of mandatory auditor retention. In contrast, some countries have adopted policies of mandatory rotation, and have banned non-audit services and introductory fee discounts. It is argued that such policies are less desirable on both theoretical and empirical grounds.
JEL Classification: M49, L84
Suggested Citation: Suggested Citation