PracticeAuditRotation: not the profession’s biggest threat

Rotation: not the profession's biggest threat

Auditor rotation is not the panacea to erase doubts over the profession's independence and objectivity in audit contracts, warns the head of audit at KPMG.

Cost is cited as the greatest obstacle to introducing a policy to rotate audit firms every five years or so.

Ted Awty, head of audit at KPMG, said: ‘Introducing new auditors is costly to the client, as the team builds detailed knowledge of the client, its business and the key issues in its financial statements. The accumulated cumulative knowledge and experience of long-term complex issues exactly where the auditor’s expertise is needed most is lost on rotation.’

Peter Williams, on the other hand, has argued that rotation is the least of the profession’s concerns in the current climate.

‘It is tempting to urge auditors to welcome the idea of a thoroughly independent inquiry to see if such a move will deal with many of the perceived problems of independence,’ said Williams.

However Williams pointed out that perhaps rotation will end up suiting the Big Five, which carry out all of the FTSE-100 audits.

‘The fierce rivalry that exists between firms at the moment could well subside, surely not a welcome side effect to those who criticise the big firms,’ added Williams.

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