Paul L. Walker

The international debate over mandatory auditor rotation: a conceptual research framework

Abstract This paper contributes to the recent international debate over mandatory auditor rotation by providing a conceptual research framework in which to view the tenure-audit quality relation. Audit quality is viewed to be a function of auditor performance. The auditor’s ability and professional conduct are argued to be major factors affecting performance. Economic incentives and market structure have endogenous relationships with both performance and tenure. Research implications of the framework suggest that evaluating the efficacy of mandatory auditor rotation is likely to be a complex process, more involved than a simple association test of the tenure-audit quality relation. The study also proposes several avenues for future examination: (1) evaluation of assumptions implicit in rotation arguments; (2) testing of magnitudes and effect directions; (3) examination of professional oversight controls; and (4) assessment of the costs of compulsory rotation.