Audit Term, Mandatory Rotation Of Audit Independence Study

Independence is the nature of auditor as well as the soul of it. We divide this article into five chapters to prove it, based upon two facts that whether auditor tenure will influence the auditor independence and whether auditor independence can be improved or strengthened by carrying out mandatory rotation.At the very beginning, we demonstrate the motivation of research about this article. Because of the financial scandal in Enron and WorldCom, Arthur Anderson which audited these two companies collapsed. Although the question that the long time auditing can improve the auditor independence is still fiercely argued, Sarbanes-Oxley of Act 2002 was issued by Congress to improve the auditor independence and get more trust from the public, in which implementing audit partner rotation has been put forward, meanwhile, GAO is authorized to have a study on mandatory rotation of registered public accounting firms. Later, China Securities Regulatory Commission and Ministry of Finance promulgated the Regulation on the Auditor Rotation of the CPAs Having the Qualification of Auditing Securities and Futures, in which signature CPA is asked to keep auditing a certain company at most five years.Secondly, the concept of mandatory rotation is defined, including mandatory rotation of registered public accounting firms and audit partner rotation. We think that the tenure, during which CPA firms, audit partner rotation can audit the financial report of a certain company, is confined within necessary limits by mandatory rotationFinally, auditor independence and the character of economy are explained.Chapter II Theories on coporate governance and auditor alteration...