Academy of Accounting and Financial Studies Journal (Print ISSN: 1096-3685; Online ISSN: 1528-2635)


Exploring the Impact of Mandatory Audit Firm Rotation on Audit Quality: An Empirical Study

Author(s): Esraa Fathi, Ahmed Sayed Rashed

This study explores professional auditors’ perceptions of the impact of mandatory audit firm rotation on audit quality via a survey- based approach with 239 auditors was drawn from a number of Big-sized and Non- Big-sized auditing firms in Egypt using one sample t-test. Lack of audit quality and subsequent audit failures result mainly from a lack of auditors’ independence and professional skepticism which are considered to be a consequence of the extended audit firm-client relationship. The findings indicated that auditors perceived mandatory audit firm rotation to have a positive effect on auditor’s independence and professional skepticism, a negative effect on client-specific knowledge. Industry specialization can offset the negative effect of mandatory audit firm rotation on client-specific knowledge. Even though the mandatory rotation of audit firms costs more, mandatory audit firm rotation increases the independence of auditors, professional skepticism, and audit quality which is relatively more than the costs.

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