An Accountancy
Age magazine article published
July 2015 notes that forcing companies to change their auditors may put professional
skepticism in jeopardy. That’s the conclusion of a number of US academics, who
published their thoughts in the American Accounting Association’s journal The Accounting Review.
According to the study, Effects of Auditor
Rotation, Professional Skepticism, and Interactions with Managers on Audit
Quality, instead of elevating auditor skepticism of clients and raising
audit quality, the intended “benefit disappears and even reverses when auditors
rotate. Rotation and a skeptical mindset interact to the detriment of audit
effort and financial reporting quality.”
Report authors, 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, said: “Rotating
auditors, aware that they will not be in a long-term relationship, will...
likely perceive themselves to be less competent in evaluating the honesty or
dishonesty of the [corporate] manager relative to auditors who do not rotate.”
As a result, “rotating auditors would find it difficult to
garner psychological support for the probability of manager dishonesty, leading
them to be less likely to choose high levels of audit effort than non-rotating
auditors.”
