Mandatory audit firm rotation and prohibition of audit firm‐provided tax services: Evidence from investment consultants’ perceptions

Aschauer, Ewald; Quick, Reiner

doi:10.1111/ijau.12109

Cited by 27 publications

(22 citation statements)

References 123 publications

(201 reference statements)

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“…In the UK, long audit tenures also decrease investors" perceptions of auditor independence, but "auditors" economic dependence upon its client" and the "joint provision of audit and non-audit services" are perceived by the investors as larger threats (Dart, 2011, p. 183). In contrast, Kaplan and Mauldin (2008) find that MAFR does not enhance independence in appearance among non-professional investors comparing to audit partner rotation, while Aschauer and Quick (2018) conclude that for professional investment consultants at banks, a rotation regime does not have a significant influence on independence in appearance.…”

Section: Independence In Fact and In Appearancementioning

confidence: 84%

“…As a result, measures that intend to improve it are welcome". However, in the same vein of Kaplan and Mauldin (2008), Dart (2011), andAschauer and, auditor 1, as well as 7, does not expect an improvement in independence in appearance, since "(…) MAFR already existed in several countries where there wasn't a better perception of the auditor". On the other hand, the remaining respondents support the positive effects on independence in appearance that Jennings et al (2006), Gates et al (2007), and Daniels and Booker (2009) refer to.…”

Section: Empirical Studymentioning

confidence: 99%

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The Introduction of Mandatory Audit Firm Rotation in the EU: the Case of Portugal

Pinto¹,

Veiga²

2019

RCBR

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A central issue in audit regulation is whether the introduction of mandatory audit firm rotation enhances audit quality. This paper contributes to the ongoing debate surrounding this issue by analyzing how senior auditors of one of the Big Four accounting firms in Portugal perceive the policy. This study adopts a qualitative methodology based on semi-standardized interviews. In general terms, the interviewees perceive mandatory audit firm rotation negatively due to the loss of client-specific knowledge it causes, the limited association between audit independence and tenure, and the resulting decrease in fees potentially harmful to audit quality.

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Section: Independence In Fact and In Appearancementioning

confidence: 84%

Section: Empirical Studymentioning

confidence: 99%

The Introduction of Mandatory Audit Firm Rotation in the EU: the Case of Portugal

Pinto¹,

Veiga²

2019

RCBR

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“…Furthermore, investors perceive auditor independence to be impaired (specifically) as a result of a lengthy audit tenure (without rotation) and thus supporting the argument for the introduction of MAFR but highlight the importance of industry-specific knowledge in order to maintain adequate audit quality (Hohenfels, 2016). This is in contrast to the perception of investment consultants according to whom MAFR leads to no improvement in auditor independence (Aschauer & Quick, 2018). Bank loan officers also support a voluntary audit firm rotation policy, according to Daniels and Booker (2011).…”

Section: Literature Reviewmentioning

confidence: 93%

Mandatory audit firm rotation: A student perspective An assessment of the perceived impact on auditor independence

Gwala

Nomlala

2021

JAAI

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Mandatory Audit Firm Rotation (MAFR), set to be implemented in South African from 1 April 2023, is poised by its propellers the world over as an essential reform in the efforts to improve auditor independence. Available literature suggests that there is no consensus regarding the impact of the implementation of MAFR. The divergent views on MAFR were demonstrated in recent time, with the European Union (EU) choosing to adopt it, while regulators in the United States decided to reject it. This paper examines the perspective of university auditing students on MAFR by examining the perceived impact it could have on auditor independence. The study finds that the majority (from 413 participants) of students surveyed are of the view that MAFR would yield positive outcomes on independence. The majority, however, agree on the MAFR Independence Benefit but warn about the possible negative consequences. MAFR will strengthen the independence of auditors.

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“…Some researchers examine NAS as one group of non-statutory audit services or consulting services (e.g., Firth, 1997, Patel, Varma, andPrasad, 2009). There are researchers who consider specifically tax services (e.g., Aschauer andQuick, 2018, Kwak andPark, 2020). Another group of researchers distinguishes three basic NAS categories: audit-related, tax, and other services (e.g., Ianniello, 2011;Wahab, Gist and Majid, 2014).…”

Section: Definition Of Nas and The Importance Of Their Disclosurementioning

confidence: 99%

The Audit Reform and Non-Audit Services in the Light of the Big-4 Transparency Reports – the EU Perspective

Indyk¹

2020

AEF

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The aim of this article is to compare and contrast three different approaches towards non-audit services (henceforth “NAS”) based on: 1) researchers’ views, 2) the EU regulation, and 3) the provision of NAS by the Big-4 firms operating in twenty-seven EU member states. Therefore, the article includes: (i) a literature review of various NAS aspects, (ii) an analysis of the EU reform in terms of NAS, and (iii) an empirical analysis of NAS fees which have been disclosed in the Big-4 transparency reports for the period 2017-2019.The literature review shows: a) lack of consensus between researchers about the potential consequences of the NAS provision in general, b) quite limited or little evidence of the consequences of the NAS restrictions as part of the EU audit reform, c) ambiguity in terms of the NAS definition itself which results mainly from insufficient NAS disclosures and lack of a detailed NAS split.The EU regulators addressed these concerns only in very narrow aspects, i.e., through: (1) the NAS black list, (2) the NAS cap, and (3) the strong emphasis on public-interest entities (henceforth “PIEs”). What is more, NAS disclosure requirements in the transparency reports are limited only to two categories.Finally, the results of the empirical study indicate the significant differences at the NAS fee level among the EU member states. The analysis shows a particular importance of NAS fees from other clients as a substantial revenue stream for the Big-4 firms. The results suggest also a significant increase in this category in 2018 when NAS fees from other clients increased by net EUR809 million (13%). However, this strong trend was not confirmed in the following year.All in all, the study underlines deficiency in proper NAS disclosure and reporting which might be observed also in the case of transparency reports. All findings of this study may be another argument for regulators to address the problem of NAS in more detail starting from their advice on a NAS taxonomy which might be used then as a point of reference. It would be also beneficial for researchers exploring the NAS aspect and, thus, may enhance data and results comparability between studies. Additional disclosure requirements like NAS provided to PIEs or a recurring or non-recurring character of NAS would also support the better understanding and evaluation of the consequences of the EU audit reform.

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Mandatory audit firm rotation and prohibition of audit firm‐provided tax services: Evidence from investment consultants’ perceptions

Cited by 27 publications

References 123 publications

The Introduction of Mandatory Audit Firm Rotation in the EU: the Case of Portugal

The Introduction of Mandatory Audit Firm Rotation in the EU: the Case of Portugal

Mandatory audit firm rotation: A student perspective An assessment of the perceived impact on auditor independence

The Audit Reform and Non-Audit Services in the Light of the Big-4 Transparency Reports – the EU Perspective

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