Mandatory auditor rotation may not be the answer for improved audit oversight and governance. Prof Ewald Aschauer considers the findings of a major survey into the relationship between auditors and CFOs, suggesting trust and professional scepticism go hand in hand
Perhaps nothing in contemporary accounting has generated more debate than mandatory auditor rotation – whether companies should be required to periodically change audit firms or audit-firm engagement partners. So voluminous has the research been, in fact, that some have wondered if the issue merits it.
Pros and cons of mandatory rotation
An argument frequently advanced in its favour is that long auditor-client relationships can induce staleness into the auditing process, with auditors relying excessively on prior years’ working papers.
Rotation, the argument goes, militates against this tendency by guaranteeing a fresh look at clients’ accounts. The converse of this argument, advanced by rotation opponents, is that familiarity with clients’ finances confers significant advantages in terms of audit efficiency and cost.
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