The Effect of Mandatory Audit Firm Rotation on Audit Quality, Audit Fees and Audit Market Concentration: Evidence from India

31 Pages Posted: 26 Mar 2019

See all articles by R. Narayanaswamy

R. Narayanaswamy

Indian Institute of Management (IIMB), Bangalore

Kannan Raghunandan

Florida International University (FIU) - School of Accounting

Date Written: March 26, 2019

Abstract

In India, the government introduced mandatory audit firm rotation following calls to improve audit quality and auditor independence in the wake of the Satyam accounting scandal. The absence of strong institutional mechanisms to prevent and detect audit failure in a timely manner has led the government to require periodical audit firm rotation. Evidence from firms for the years 2014 to 2017 suggests that mandatory audit firm rotation does not appear to have improved audit quality, reduced audit costs and increased audit market competition.

Keywords: auditor changes; audit fees; audit quality; audit market concentration

JEL Classification: M42, M48

Suggested Citation

Narayanaswamy, Ramaswami and Raghunandan, Kannan, The Effect of Mandatory Audit Firm Rotation on Audit Quality, Audit Fees and Audit Market Concentration: Evidence from India (March 26, 2019). IIM Bangalore Research Paper No. 582 (2019), Available at SSRN: https://ssrn.com/abstract=3360256 or http://dx.doi.org/10.2139/ssrn.3360256

Ramaswami Narayanaswamy (Contact Author)

Indian Institute of Management (IIMB), Bangalore ( email )

Bannerghatta Road
Bangalore, Karnataka 560076
India

Kannan Raghunandan

Florida International University (FIU) - School of Accounting ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States
305-348-2582 (Phone)

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