Jul 29, 2015, 10:30
by
Gies College of Business

Jessen Hobson
A paper co-authored by Assistant Professor of Accountancy and PwC Faculty Fellow,
Jessen Hobson, in the new issue of an
American Accounting Association (AAA) journal
The Accounting Review casts doubt on the long held belief that mandatory auditor rotation promotes skepticism.
An intricate experiment reported in a leading accounting journal has cast new light on what may be the most contentious issue regarding the auditing of corporate financial reports -- namely, whether companies should be required to periodically change their auditors, as currently mandated to varying degrees in the U.S. and Europe.
calls the entire practice into question with the surprising discovery that rotation inhibits skepticism, a perspective universally viewed as essential to effective auditing. The primary reason traditionally advanced to require rotation is that it encourages skepticism.
In the words of the study, "Professional skepticism requirements are intended to elevate auditors' skepticism of their clients and, ultimately, audit quality...This benefit disappears and even reverses when auditors rotate. That is, rotation and a skeptical mindset interact to the detriment of audit effort and financial reporting quality."
You can read a
press release and download the
full research paper on the AAA website.
In the News:
The findings have been featured in a variety of other publications as well.
Questions remain about rotation of audit firms | Accounting Weekly
Study Says Auditor Rotation Inhibits Skepticism | AccountingWEB
Rotation May Hinder Audit Quality, Study Says | Compliance Week
Mandatory audit rotation big threat to scepticism, say academics | Accountancy Age
Study Questions Impact of Audit Firm Rotation on Auditor Skepticism | Accounting Today News
Blog: Does Auditor Rotation Impair Professional Skepticism? | Cooley LLP - JDSupra
Mandatory audit rotation big threat to scepticism, say academics | Financial Director News
Auditor Rotation May Actually Inhibit Skepticism | CFO Magazine