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The perceived financial effects of mandatory audit firm rotation
Journal of International Financial Management & Accounting ( IF 2.808 ) Pub Date : 2020-01-28 , DOI: 10.1111/jifm.12115
Michael Harber 1 , Ben Marx 2 , Phillip De Jager 3
Affiliation  

This paper explores the perceptions of key audit industry stakeholders concerning the direct and indirect financial effects of the implementation of mandatory audit firm rotation (MAFR) in South Africa. Globally, concerns over audit quality, in response to corporate failures, have resulted in renewed debate over MAFR as a solution. The European Union and South Africa have recently ruled in its favor, while other countries have rejected it on grounds that the benefits do not exceed the costs. Using structured surveys, the informed perspectives of experienced auditors, chief financial officers, audit committee chairs, and equity fund managers are explored and contrasted. We find that considerable costs will be imposed on audit firms in the form of “setup and transition costs,” as well as costs incurred to submit and present competitive tenders to secure appointment. Although auditors will try to recoup these costs with fee increases, this will likely not be allowed by the clients, resulting in a squeeze of audit firm profits. The Big 4 firm fee premium, relative to non‐Big 4 firms, will decrease due to increased competition. From the clients' perspective, the costs will be in the form of audit inefficiency translating into staff time and disruption, caused by the incoming auditors being less familiar with the complexities of the business. We contribute to the literature detailed descriptions and estimations of the nature and extent of potential cost implications, as expressed by experienced practitioners. The findings inform audit industry regulators, standard‐setters, and practitioners to more effectively mitigate potential unintended consequences of the regulation.

中文翻译:

强制审计公司轮换的预期财务影响

本文探讨了关键审计行业利益相关者对在南非实施强制性审计事务所轮换(MAFR)的直接和间接财务影响的看法。在全球范围内,对因公司失败而引起的审计质量的关注,导致人们对以MAFR作为解决方案的新辩论。欧洲联盟和南非最近作出了有利于它的裁决,而其他国家则以利益不超过成本为由拒绝了它。使用结构化调查,探索并对比了经验丰富的审计师,首席财务官,审计委员会主席和股票基金经理的见解。我们发现,将以“设立和过渡成本,”以及为确保任命而提交和展示竞争性招标所产生的费用。尽管审计师会尝试通过增加费用来弥补这些费用,但客户可能会不允许这样做,从而导致审计公司的利润受到挤压。与四大公司相比,四大公司的费用溢价将因竞争加剧而降低。从客户的角度来看,成本将以审计效率低下的形式转化为员工的时间和工作中断,这是由于新任审计师对业务复杂性的了解较少而造成的。如经验丰富的从业人员所表达的,我们将对潜在成本影响的性质和程度的文献进行详细描述和估算。调查结果告知审计行业监管机构,标准制定者,
更新日期:2020-01-28
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