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Essay Available:
Pages:
3 pages/≈825 words
Sources:
6 Sources
Level:
APA
Subject:
Accounting, Finance, SPSS
Type:
Research Paper
Language:
English (U.S.)
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MS Word
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Topic:

Mandatory audit firm rotation (Research Paper Sample)

Instructions:
Mandatory audit firm rotation Following the Enron debacle there has been some discussion by policy makers (especially in Congress) of mandatory auditor rotation. The idea is that rather than allowing companies to retain the same auditor forever, companies would be required to change auditors every (say) seven years Discuss the pros and cons of mandatory audit firm rotation What is your point of view on this topic If you can please not quote papers from a website called student papers something like that. Please I cant afford plagiarism, they do use a system that checks this. source..
Content:

Mandatory Audit Firm Rotation
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Mandatory Audit Firm Rotation
Introduction
In the recent past, the financial reporting structure used in firms and other organizations has been under watch and inspection. This is in the wake of government watchdogs and policy makers all over the globe examining lessons from the economic crisis and considering upgrading to better care for the investors. The improvements made on the financial audit structure, as developed by policy makers and other groups of interest, includes the idea that rather than allowing companies to retain the same auditor forever, companies would be required to change auditors at least after seven years. This is what is referred to as mandatory auditor rotation.
It is aimed at reversing trend and ensuring flexibility, transparency and accountability of the financial sector. However, the institution of the idea, back in August 2011 by the Public Company Accounting Oversight Board (PCAOB) has been received by mixed reactions in the companies (Mandatory Audit Firm Rotation Study, 2004). Stakeholders and other groups of interest have different take on the issue (Investor Reaction to the Prospect of Mandatory Audit Firm Rotation). Some view it as advantageous while others deem it as a detrimental in the company operations and the corresponding flexibility.
The scholarly conclusions on mandatory auditor rotation are mixed with no apparent depiction as to whether the auditor rotation is helpful. In addition to lack of transparency, is the growing awareness that the relationship connecting auditor term and audit eminence is rather intricate (Audit Firm Rotation). This translates to the fact that there are advantages and disadvantages of the mandatory auditor rotation. Therefore, this paper will discuss the pros and cons of the mandatory audit firm rotation. To arrive at the conclusions statistical analysis was carried out in relation to the topic of discussion.
Advantages
It has been stated earlier that the mandatory audit firm rotation is aimed at periodically picking a different watchdog to replace the existing one. Those who advocate for the policy deem it as the best way to ensure the transparency of the audit firms (David and Susan, 2011). They argue that the policy is advantageous in the sense that, long-standing audit firm appointments have the tendency of weakening the workability and performance of the auditors (HYPERLINK "http://blog.nacdonline.org/author/kurt-groeninger/" \o "Posts by Kurt Groeninger"Groeninger, 2012). The mandatory audit firm rotation ensures that the firm does not please the auditors just for the case of maintaining the engagement. This means that most firms gratify their auditors for the sole purpose of keeping them in the game. They therefore, end up biased by their own deeds in order to safeguard the client bond that pays their salary.
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