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Bank Loan Officers’ Perceptions of Audit Firm Rotation
Bobbie W Daniels,
Jackson State University
Quinton Booker, Jackson State University
ABSTRACT. This study explores bank loan officers’ perceptions of audit firm rotation using a questionnaire, which includes a between-subjects case scenario. We address general issues of rotation and specific aspects of rotation, including the impact of rotation versus no rotation on perceptions of auditor independence and audit quality. Findings indicate that loan officers (1) support mandatory rotation of public accounting firms; (2) perceive that rotation will increase auditor independence; (3) perceive that rotation will discourage aggressive accounting practices; (4)agree rotation will lead to higher quality audits and (5)agree that rotation will decrease management’s ability to influence the auditor. Case scenarios indicate that there is a greater perception of auditor independence and likelihood that errors discovered by the auditors will be reported when a company follows a rotation policy versus when there is no rotation policy
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