The interplay between auditor rotation and audit opinions: evidence from Republic of Kosovo

Abstract

This study explores the interplay between auditor rotation and audit opinions in the developing economy of Kosovo. There is limited research investigating this dynamic within developing economies, and the findings from established economies present a conflicting picture. The research aims to identify the nature of the relationship between auditor rotation and audit opinions in Kosovo, explore whether auditor rotation leads to more conservative audit opinions, and compare this relationship with trends in more mature economies. The study employs a quantitative research design, leveraging archival data from financial statements and audit reports of companies who published their audit reports with Kosovo Council for Financial Reporting (KCFR) during the period 2019 to 2022. Logistic regression analysis shows a significant positive relationship between auditor rotation and audit opinions in Kosovo, suggesting that auditor rotation might lead to more conservative audit opinions. The results also indicate that these dynamics in Kosovo differ from those in established economies, underscoring the influence of unique contextual factors. The findings carry implications for regulators, auditors, and companies in Kosovo, enriching the ongoing debates on auditor rotation and audit quality. This study calls for more extensive research in this field, considering additional audit quality measures and extending the sample to broader range of entities across different sectors and geographical regions.