THE RELATIONSHIP BETWEEN PERIODIC AUDITOR ROTATION AND THE OVERALL QUALITY OF AUDITS
Date Issued
2004
Date
2004
Author(s)
Shan, Shih-Ta
DOI
zh-TW
Abstract
In 2003,the Taiwan Stock Exchange and GreTai Securities Market implemented a new policy, whereby listed firms that have been audited by the same auditor for the past five years would be placed on a “watchlist”.
This study interviewed various members of the auditing community, including small and large-sized auditing firms, junior and senior auditors, and partners of auditing firms to get their take on the two permissible ways that listed firms can switch auditors – that is, by changing auditors within a particular firm, and by changing auditing firms.
After completing this questionnaire, the study arrived at six conclusions, which can be summarized as follow: (1) Participants of the questionnaire generally agree that mandatory auditor rotation enhances the independence in fact and in appearance of auditors; (2) The quality of a particular audit is not affected by the way a firm switches auditors; however, there are some drawbacks associated with switching auditors via changing auditing firms; (3) Rotation among auditing firms influences the motivation of auditors to achieve an industry specialization professionalism; (4) Both ways of changing auditors result in higher costs, but if the auditor rotation is done within the same firm, from the perspective of the auditing firm, there should be no change in fee income; (5) Partners of auditing firms – especially those of larger firms – do not favor rotation among firms. Furthermore, they would prefer a longer rotation period; (6) Participants of the questionnaire generally prefer rotation among auditors within the same firm, and the mean ideal rotation period suggested was 4.16 years. Those larger firms would prefer a longer rotation period.
Subjects
審計成本
審計品質
auditor rotation
rotation of auditing firms
Type
other