Inspections Findings

Since the announcement of Mandatory Audit Firm Rotation

RBA concerns with tenure - set a new precedent with mandatory disclosure of tenure in 2015

Risk of large fines against audit firms globally leading to greater concentration in the market

Global and local developments around business failures, investor losses and audit failures

Other concerns: Myburgh Report, audit fees revenue-driven instead of risk-driven, neglect of high risk areas during audit, declining quality reported from inspections, consent orders (“admission of guilt”) – 57 in 2016

The closest natural event which most closely mimics mandatory audit firm rotation was the collapse of Arthur Andersen, after which least 6,543 companies changed auditors. In Analyzing Auditor Changes (Grothe and Weirich, 2007) the authors present an analysis of auditor changes over four years (2003 to 2006) and note that with so many voluntary changes occurring without a mandatory auditor rotation requirement, that it demonstrates that MAFR every five to 10 years would be feasible, despite the small number of firms competing to audit large companies.

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