Does the rotation of auditors improve the quality of auditing Essay - 5

Does the rotation of auditors improve the quality of auditing - Essay Example Auditing had never been influential and applicable as it is today. Each corporation feels the need to examine its accounts from time to time, and especially when change is about to occur, so that it can determine their correctness and fairness, as well as detect of any irregularity. Auditing is broad and can be conducted for systems, data, and finances which are of great concern in this context. Auditing can be described as an examination and verification of accounting data with an aim of establish the correctness and reliability of the accounting reports and statements (Shirin, 2009). However, numerous controversies exist over establishing a standard against which actual audit performances can be measured. Therefore, organizations may have difficulties in assessing the effectiveness and quality of their audit, even if it serves the purpose. Audit quality has been described by Fearnley et al as the â€Å"market assessed joint probability that a given auditor will both discover a bre ach in the client’s accounting system and report the breach† (2011, p. 2007). Organization’s committees and shareholders need enhanced audit quality for the sake of delivering appropriate organization audit results and opinions. Firm rotation of auditors has been campaigned for and applied in some countries as a way of improving audit quality. The issue of audit quality that auditors’ rotation attempts to address There are several factors that affect the quality of audit. Nowadays, clients want to be confident of the financial reports they get, to make future projections of the business. Internationally, various initiatives have been proposed to establish a standard or enforce some consistencies across borders, in how the auditors ought to accomplish the audit objective, and what financial statements clients should expect (ICAEW, 2010). The number of recently reported financial failures in organizations call for more accountability and undertaking of effec tive measures for countries, firms, and audit practitioners, whom are all affected in case of any unexpected undesirable effect after auditing. There have been cases of firms experiencing frauds and even bankruptcy after a repetitive auditing by specific auditors, while auditors are sometimes prevented from delivering certain quality audit results due to differences in countries’ regulations, economic incentives, their ability, and expertise. Considering the perceived audit failures, there is an urge for audit effectiveness and efficiency to enhance clients’ confidence in the quality of audit reports. This remains the greatest problem in quality control. Rotation of auditors is one of the strategies recommended, but still debatable over its success in promoting audit quality. Rotation of auditors The concept of auditors’ rotation is related to job rotation of employees, but unlike the later, which is intended to enhance motivation, the former has clear based obj ectives to impact on the quality of audits. Due to the established failure and fraud cases when a former auditor has been reemployed for a longer term by a specific client, companies avoid hiring similar auditing firms for a subsequent number of years to conduct their audits. The issue surfaced since the 90s and proposes that audit firms serve as client auditors for a certain period, then replaced by others. AICPA requirement proposes seven years of an auditor firm or auditor service, after which rotation occurs