An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Bobbie W. Daniels
Jackson State University

Quinton Booker
Jackson State University

Abstract: This study explores loan officers’ perceptions of auditors’ independence and audit quality under three experimental audit firm rotation scenarios We used a case experiment with a between-subject design to determine whether rotation of the audit firm would impact financial statement users’ perceptions of independence and quality. In the first scenario, the company did not follow an audit firm rotation policy and had consistently used the same audit firm. In the second and third scenarios, the company had followed a policy of rotating the audit firm every seven years. The length of the auditor’s tenure was one year for the second scenario and six years for the third scenario.

Results indicate significant differences in perceptions of independence when the company followed a rotation policy versus when there was no rotation. However, the length of auditor tenure within rotation failed to significantly change loan officers’ perceptions of independence.

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