Does the rotation of auditors improve the quality of auditing Essay - 3

Does the rotary motion of canvasors improve the quality of take stocking - Essay Examplential advantages of MAR fail to overbalance costs incurred and other associated risks. 3 In this context, the essay provide review the available literature that analyses whether revolution of attenders improve quality of auditing. It will use deductive reasoning to derive that while there atomic number 18 not much empirical data that prove MAR significantly improves audit quality, at the same(p) time, there is not much conclusive evidence that shows MAR has an adverse effect on audit quality, thus keeping the debate open. Discussion Audit, audit quality and auditor rotation In the UK, it is requisite for all public sector organisations and large business firms to produce an annual, audited financial report. In this context, the term auditing refers to a systematic process of objectively gathering and evaluating evidence relating to assertions about economic actions and events in which the i ndividual or organisation making the assertions has been engaged, to ascertain the degrees of correspondence between these assertions and established criteria.4 The Public Company score Oversight Board (PCAOB) had recently published a report asking for public suggestions on the melioration of audit quality and auditor independence, wherein auditor rotation was taken into consideration.5 There ar varying opinions on the effects of auditor rotation, and researches have revealed that existing literature fails to derive conclusively on the effects of audit rotation, hence researchers must be careful when analysing audit rotation reports from the past.6 Supporters for auditor rotation claimed that a long kin between an auditor and a company develops a feeling of dependency that in farm diminishes audit quality.7 However, those against auditor rotation claimed that auditor rotation is an expensive process and the costs far outgo any derived advantages.8 Furthermore, they also claim ed that auditor rotation is a hurdle, in regard developing a relationship between the firms managers and auditors based on confidence and trust, and social exposures between the two frequently lead to improved audit quality, without hampering auditor independence.9 The theoretical debate on the issue of auditor rotation is based on how one views the auditor. If the auditor is seen as a medium for wealth optimisation, there are various theories that support the concept that there is an improvement of audit quality due to rotation.10 However, if one viewed the auditor as an agent for the principals, rotation is deemed disadvantageous, and a long-term relationship would allow the auditor to get a better understanding of the principals objectives, thus making him/her a better auditor.11 The term audit quality denotes the fortune that an auditor will find shortcomings within a firms accounting system (competence), and will report on them (independence).12