Auditor rotation will not boost independence
Compulsory rotation of audit firms is unlikely to strengthen auditor independence, according to research to be published later this year.
But accounting firms should be prohibited from offering their audit clients consulting services, including tax, legal and corporate finance advice, to prevent possible conflicts of interest, the study found.
The research, by Professor Maurizio Dallachio of the business school of Bocconi University in Milan, was carried out among Italian firms, which have been subject to auditor rotation since 1980.
The findings are likely to encourage the Big Four firms, who argue that mandatory rotation affects audit quality. Audit teams would take time to work up to full effectiveness and would lose interest as rotation date approached, the firms claim.