Laissez-faire or mandatory auditor rotation: The case of audit firm tenure and audit firm switching

• Main Authors: Shafie, Rohami, Md Yusof, Mohd 'Atef, Md Hussain, Md Hairi
• Format: Conference or Workshop Item
• Language: English
• Published: 2004
• Subjects: HF5601 Accounting
• Online Access: http://repo.uum.edu.my/10434/1/Laissez-faire%20or%20mandatory%20auditor%20rotation.pdf; http://repo.uum.edu.my/10434/
• Institution: Universiti Utara Malaysia

The issue of audit tenure has been discussed since four decades age. Nowadays, due to the recent corporate scandals in the United States, the issue is discussed together with auditor independence that led to companies’ demise. Therefore, this study attempts to investigate the situation in Malaysia whereby no empirical study using archival data has been done. There are two major findings. First, the variable of audit firm tenure is positively significant relationship with going concern opinion. Second, when a client never changes its auditor since became a public listed company; there is a tendency to issue a clean opinion though the client suffers apparent financial problems. This implies that, “auditor change would do well, but forcing an unrealistic auditor rotation might not yield what it hopes for”. Therefore, we echo the importance of self-regulation and Laissez-faire practice in Malaysia as a better alternative than a mandatory auditor rotation.