Mandatory auditor rotation can inhibit rather than encourage professional skepticism and have the opposite effect of what is intended, according to a recent U.S. study.
“Professional skepticism requirements are intended to elevate auditors’ skepticism of their clients and, ultimately, audit quality,” said the study’s authors. “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.”
The results of the study by Kendall Bowlin of the University of Mississippi, Jessen Hobson of the University of Illinois at Urbana-Champaign and David Piercey of the University of Massachusetts-Amherst appear in the July 2015 issue of The Accounting Review, and are based on a complex experiment involving students who did not know they were playing the role of auditors and corporate managers.