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Rotation May Hinder Audit Quality, Study Says

Tammy Whitehouse | July 21, 2015

A new academic paper suggests rotating auditors may not be such a good idea, especially as regulators are getting tough on auditors to show more skepticism and objectivity in their work.

The study appears in the latest issue of The Accounting Review, the research journal of the academic American Accounting Association. The authors say they used psychology theory and a lab experiment to show that the prevailing assumption about the benefits of rotating audit partners -- that it will encourage skepticism -- is off target. In fact, the study says, skepticism “disappears and even reverses when auditors rotate. That is, rotation and a skeptical mindset interact to the detriment of audit effort and financial reporting quality.”

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