The effect of Mandatory Audit Firm Rotation on Audit quality

Abstract

Due to the expanding number of International accounting scandals, the audit profession is facing a delicate credibility issue, and auditors are held responsible for not being independent and prevent these scandals. Therefore, to enhance the auditor’s independence and to avoid any excessively long-term relationship with his client, the audit mandatory rotation rule has been implemented. However, there is a huge debate over this latter, some people think that indeed by limiting the relationship between the auditor and his client, the auditor’s independence is strenghtened and therefore leads to a superior audit quality. On the other hand, many people argue that the knowledge acquired by the auditor in each company will be lost due to rotation which will weaken the audit quality. The object of this Thesis is to contribute to the debate and study the impact of the mandatory audit firm rotation rule on the audit quality.