The effect of audit partner rotation on audit quality

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Background: The new Spanish Audit Law (2015) includes stricter safeguards related to mandatory audit partner and audit firm rotation than the former Law (2010). These safeguards imply a high cost for the market, but evidence about their convenience for accounting information users is not conclusive. Objective: To provide evidence about the effect of mandatory audit partner and audit firm rotation on audit quality. Specifically, this report analyzes if audit partner rotation has a positive influence on audit quality by itself or it must be strengthened by audit firm rotation. Method and sample: This study focuses on the observable audit partner and audit firm changes in the Spanish market. The sample consists of the big companies with financial distress symptoms. The issuance of a going concern uncertainty acts as a proxy of audit quality. We analyze if financially distressed companies which changed their audit partner or audit firm have a higher probability to receive a going concern qualification. Results: The results show that audit partner rotation doesn't affect audit quality. Moreover, audit firm rotation by itself or together with audit partner rotation doesn't influence audit quality. Conclusions: High cost safeguard measures have been imposed on the market but they have not demonstrated to be any effect on audit quality.




Gómez Aguilar, N., Biedma López, E., & Ruiz Barbadillo, E. (2018). The effect of audit partner rotation on audit quality. Revista de Contabilidad-Spanish Accounting Review, 21(1), 7–18.

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