A Study On The System Of Forced Audit Rotation

With companies such as Enron and World Com financial scandals and Adachi Nobu, Zhong Tian Qin and other large firms audit failure cases continue tooccur, have brought the great impact to the world and our country’s capital market and the supervision mechanism, but also to the independence of CPA and audit quality problems have become an increasing concer.In order to maintain the independence of the audit, to improve audit quality, and effectively curb the endless stream of financial fraud and audit failure,audit rotation system (from arbitrary rotation system audit DuPont Co to audit rotation system of compulsory) is widely believed to strengthen the CPA independence and an important means to improve the audit quality. The United States through the "Sarbanes-Oxley act" in2002at the end of7, the provisions of the accounting firm partner or review audit project partners, for the same customers continuously providing audit service shall not exceed5years, otherwise it will be regarded as illegal. China promulgated in2002June, the Chinese Institute of certified public accountants "professional ethics guidance", also put forward the accounting firms should be regular rotation of audit project manager and the CPA requirements. In2004, China’s implementation of the audit business of securities and futures of the CPA regular rotationsystem, requirements of CPA tenure over5years will have to be replaced, but from the implementation point of view, there are still a part of the company did not carry out the policy.In2009, the code of professional ethics of the CPA auditor rotation problem put forward again,and expanded the range of rotation.This paper firstly introduces the origin and development of audit rotation rotation system, describes the research background of audit rotation system, and then introduces the domestic and foreign different views about mandatory rotation of audit system, basically divided into twokinds of supporting and opposing views. The third chapter the connotation of audit quality and professional competence and independence are reviewed, focusing on the impact of the following basic compulsory audit rotation system on these two characteristics, to analyze the influence on audit quality. And has carried on the feasibility analysis of this system through therational economic man theory and contract theory of audit, the audit rotation system withtheory support force. The fourth chapter focuses on the analysis of the mandatory auditrotation system is how to impact on auditors’professional competence and independence,and a comprehensive analysis of the influence on audit quality. The fifth chapter through the analysis of cost factors of audit rotation system, then combined with the failure cases of Nanjing Zhongbei group suffered a big loss because of the lack of implementation of audit rotation of audit, the audit rotation system by the implementation cost and the audit failure loss into consideration analysis, I have finally reached the conclusion that the implementation of audit rotation system is far less than the cost of the audit the failure of the losses suffered by the implementation of mandatory rotation of audit and support system. According to the above theory and case analysis, I put forward some proposals to improve the audit quality. At the end of the paper, points out the deficiencies in the article, and puts forward the prospect of audit rotation system, with the development of our national economy and the constant improvement of laws and regulations, the government will formulate a suitable for China’s national conditions of audit rotation system, to ensure the independence of audit, improve audit quality.