Can the Academic Literature Contribute to the Debate over Mandatory Audit Firm Rotation?

22 Pages Posted: 10 Feb 2013

See all articles by Jeffrey R. Casterella

Jeffrey R. Casterella

University of Auckland

Derek Johnston

Colorado State University, Fort Collins - Department of Accounting

Date Written: January 1, 2013

Abstract

Recently, the Public Company Accounting Oversight Board (PCAOB) issued a concept release soliciting public recommendations to improve auditor independence and audit quality [PCAOB, 2011]. The focus of the release is on mandatory audit firm rotation (MAFR) with a request for commentaries addressing the advantages and disadvantages of MAFR. In this paper, we briefly summarize the recent literature on mandatory audit firm rotation and suggest how it can be useful to regulators as they consider the implementation of mandatory rotation. We find that the conclusions reached about the possible effectiveness of MAFR appear to depend on the type of data used (voluntary vs. mandatory auditor changes), suggesting that regulators should exercise care when drawing inferences from past audit firm rotation research.

Keywords: audit firm rotation, independence, audit quality

Suggested Citation

Casterella, Jeffrey R. and Johnston, Derek, Can the Academic Literature Contribute to the Debate over Mandatory Audit Firm Rotation? (January 1, 2013). Research in Accounting Regulations, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2214581

Jeffrey R. Casterella (Contact Author)

University of Auckland ( email )

Auckland
New Zealand
970-2170947 (Phone)

Derek Johnston

Colorado State University, Fort Collins - Department of Accounting ( email )

256 Rockwell Hall
Fort Collins, CO 80523
United States
970-491-6443 (Phone)