Empirical Study Of The Relationship Between The Mandatory Rotation Of Auditor And Audit Efficiency

Since the born of CPA audit,audit efficiency has been the focus of audit. Recently there are a lot of fraudulent financial reports in the world, include Enron, World.com and Arthur Andersen's failure, and etc. At the same time, a series of financial scandals happening in a branch of listed companies in china damaged social credibility of independence of audit seriously .The audit industry got into a distrusted phase all over the world. The issue of mandatory rotation of auditor has been disputed for long, and recently series of financial scandals bring it to many countries' notice again. Mandatory auditor rotation has been put up as a useful way to improve audit quality. In 2004, mandatory rotation of auditor institution was implemented by government improving audit efficiency.Under the background described above, this paper is based on the institution which published on October 8th,2003 by SFC. It reviewed the domestic and foreign existing achievements and the real situation in china. It is expected to reflect the audit efficiency during the period of mandatory rotation of auditor. According to the methods of theoretical analysis and empirical testing, this paper analyzed the auditing efficiency during the period of rotation. The results show that: after controlling the influence of other variables, audit tenure is negative to audit efficiency in 2004. To the companies which had to change auditor in 2004, the audit efficiency enhanced in 2004, but reduced in the following years, the relationship between auditor tenure and audit efficiency is inverse right state"U"shape in this period.On the base of reviewing the related theory, we reasoned the change of auditor. The paper used methods of empirical testing, attempted to analyses the relationship between auditor tenure and audit efficiency in order to made suggestions to the implement of the institution. Finally, this paper made suggestions that strengthen the audit supervision, control the audit risk and promote the audit quality during these years, meanwhile this paper provided reference for improving the efficiency of audit and the development of the institution.