$20 Bonus + 25% OFF
Securing Higher Grades Costing Your Pocket? Book Your Assignment at The Lowest Price Now!

Adequacy Of The Mandatory Rotation Of Audit Firms

tag 0 Download5 Pages 1,014 Words tag Add in library Click this icon and make it bookmark in your library to refer it later. GOT IT


Discuss about the Adequacy of the Mandatory Rotation of Audit Firms.




According to section 324DA (1) and (2), of the 2001 corporations act, an auditor is not allowed to be an auditor of one firm for a period of five years[1]. This law establishes a mandatory rotation of partners, for purposes of preventing prevent and fairness in financial reporting. However, it is the 2004 Audit Reforms and the Corporation Disclosure Act that was responsible for ensuring that corporate organizations rotate audit firms, after a period of five years[2]. The law has been criticized by a number of stakeholders in the large corporate organizations that it affects the quality of audit reports, because of movement of experienced audit staff who are auditing the financial reports of the company. However, the law has helped in improving corporate governance and financial disclosures in Australia; hence it is working adequately in Australia.

In fact, a research conducted by Hossain and Larrelle indicates that companies which voluntary rotates auditors have seen a significant impact on corporate governance[3]. These companies are now able to develop policies and laws that ensure financial transparency and the satisfaction of the needs of its stakeholders. These stakeholders include customers, shareholders, their suppliers and the government. According to the study by Hossain and Larrelle, the main reason that corporate organizations are complaining about the implementation of the law, is the fact that it is an expensive process for auditors and their firms, to keep on rotating after about five years. However, upon examination of about 1200 companies between 2003 and 2009, Hossain and Larrelle explain that most of these companies allowed for voluntary rotation of audit firms[4].                   

They allowed for voluntary rotation of audit firms because the costs the organization incurred was not that high, and the rotation of these firms led to better efficiency in corporate governance and financial reporting. This is because new auditing firms came up with new ideas on governance based on the changing needs of the society. It also made the company to be flexible in the manner that they engage in financial reporting and corporate governance. Furthermore, during this study, Sarowar and Hossain explain that 15% of the companies that engaged in voluntary rotation of audit firms showed a significant improvement on the efficiency of their corporate governance[5]. Therefore, the result of this study reinforces the notion that the Mandatory Audit Rotation Firm has led to an improvement of the corporate governance of companies in Australia. 


Furthermore, Hossain and Larrelle explain that there was an increase in efficiency, in the manner which the audit firms provided financial disclosures. Of the 1200 firms that were analyzed, most of them provided accurate financial reporting, because the auditors feared that a new firm would scrutinize its auditing activities, and in circumstance where there is poor reporting, they will be identified[6]. Hossain and Lorralle explain that before the enactment of the 2004 law that requires companies to rotate the firms engaged in auditing the financial records of a company, Australian companies could have the same auditors for a period of about 20 years. This could compromise the manner which these auditing firms were auditing the records of the organization; hence, promoting fraud and poor financial reporting[7].

However, with the enactment of the Audit Reforms and Corporation Disclosure Act, companies were forced to rotate auditing firms after a period of about five years, resulting to accurate financial reporting and disclosure. Furthermore, auditors of these firms were reluctant to report and disclose the financial records as per the wishes of their clients. Instead, auditors of these firms followed professionalism and ethics while carrying out auditing, because of the need of protecting their brand names and fear of being reported by new auditing firm that will take over, once they leave[8]. Therefore, it is possible to assert that mandatory auditing of firms plays an important role in promoting the independence of an auditor. For the success of an auditing process, the auditors must be independent. The independence of an auditor during the process of financial reporting is recognized under section 324DC of the 2001 Corporations Act[9]. The law is developed on the basis that without an independent auditor, chances of getting accurate report is minimal.   

Despite the adequacy of the mandatory audit rotation of firms, critics argue that it is an insufficient process, and it cannot guarantee the quality of an auditing process[10]. The major reason that these critics argue against the implementation of the audit rotation law is because it takes about two years for a new auditing firm to understand the accounting system and records of a firm[11]. Furthermore, for large companies, it may take longer because they operate complex financial records. However, these allegations are not accurate because of established standards and practices of financial reporting.

Finally, mandatory audit rotation of firms is working adequately in Australia. This is because the law has helped in improving corporate governance through accurate financial reporting and disclosures. Furthermore, the law promotes the independence of auditors, because they will resist to be influenced by their clients, for purposes of providing inaccurate financial disclosures. Despite these advantages, there are concerns that the law is insufficient because it requires more time for new auditors to understand the financial reporting techniques of an organization. However, this is not correct because there are established standards that govern the process of financial reporting.



Books, Journals and Articles

Cheuk, Man Chiu, Auditor Rotation Versus Audit Partner Rotation (2006)

Houghton, Keith A et al, The Future Of Audit (ANU E Press, 2010)

Hossain, Sarowar and Larelle Chapple, "Mandatory Auditor Rotation – Australian Evidence" [2015] Australian Journal of Corporate Law

Kim, Hakwoon, Hyoik Lee and Jong Eun Lee, "Mandatory Audit Firm Rotation And Audit Quality" (2015) 31 JABR

Ryken, Kirsty, Renee Radich and Neil L. Fargher, "Audit Partner Rotation: Evidence Of Changes In Audit Partner Tenure As The Result Of Mandatory Regulation In Australia" (2007) 1 Current Issues in Auditing

Cases and Legislations

Corporations Act 2001 Section 324 DC

Audit Reforms and the Corporation Disclosure Act 2004 


Cite This Work

To export a reference to this article please select a referencing stye below:

My Assignment Help. (2018). Adequacy Of The Mandatory Rotation Of Audit Firms. Retrieved from

"Adequacy Of The Mandatory Rotation Of Audit Firms." My Assignment Help, 2018,

My Assignment Help (2018) Adequacy Of The Mandatory Rotation Of Audit Firms [Online]. Available from:
[Accessed 28 March 2020].

My Assignment Help. 'Adequacy Of The Mandatory Rotation Of Audit Firms' (My Assignment Help, 2018) <> accessed 28 March 2020.

My Assignment Help. Adequacy Of The Mandatory Rotation Of Audit Firms [Internet]. My Assignment Help. 2018 [cited 28 March 2020]. Available from:

For years, has been operating as one of the cheap assignment help providers in the USA. We are one of the best college paper writing services that keep service price minimal. We do not let the affordability of our service to hamper the standard of our work. We have separate teams of experts to provide report writing help . At, we believe in earning credibility, so students can pay for assignments only after getting satisfied solutions. Tough assignments bother you? Trust us with your project. You will not regret paying us to write assignments for you.

Latest Samples

MBA402 Governance Ethics And Sustainability 4

Download : 0 | Pages : 10

Answer: Introduction  Internal competition, decentralization and several elements increase the risk of the company; risk exposure calculator calculates the risk of the company by considering the pressure points related with the performance, information management and growth of the company  (Forouzanfar & et al. 2015). The present study is related with the analysis of risk of the company named as Property Millionaire. The company...

Read More arrow

UUMG8300 Leading Business And Organisational Change

Download : 0 | Page : 1
  • Course Code: UUMG8300
  • University: UUNZ Institute Of Business
  • Country: New Zealand

Answer: Degree To Which Stakeholders Trust Those Leading The Change Unitech is one of the leading academic aspirants in contemporary and applied learning and it need to change with time and situations to enable better futures to students, enterprises and communities as a whole Carnall (2018). Though change is a complex process but still it is obvious for Unitec. The company stakeholders should rely on communication for managing the changes...

Read More arrow

ACC03043 Corporate Governance

Download : 0 | Pages : 10

Answer: Report To Chairperson Board of Directors From: Jane White, Corporate Governance Consultant Date: 22 January 2019 Subject: Cybersecurity policy of the company In the world full of technology, every organization is diverting it is focused on the use of technology. The reason behind the same is the infinite advantages that technology adds to the overall value of the company. The use of the internet and other technological innovatio...

Read More arrow

ECTPP202A-Framework Of The Early Childhood Learning

Download : 0 | Pages : 10

Answer: Introduction This following is a debate which will examine and compare the documentation, planning and assessment procedures and pedagogies and implemented of the five selected territories, while staying underlined by the national approved framework of the early childhood learning, The essay will help in the identification of the principle points that must be taken into consideration regarding each territory and state’s app...

Read More arrow Tags: Australia Chippendale Management assignmet help (case study) University of New South Wales 

200425 Economics : Human Development Index

Download : 0 | Pages : 6

Answer: Workshop Question 1 The UNDP describes development on the basis of three essentials, which includes the ability for a country’s population to have long and healthy life, have a decent standard of living and quality education (Frugoli et al, 2015, p.370). Through the Human Development Index, a country’s overall well-being can, therefore, be easily measured. It’s a social measurement as it takes into consideration the...

Read More arrow

Save Time & improve Grades

Just share your requirements and get customized solutions on time.

We will use e-mail only for:

arrow Communication regarding your orders

arrow To send you invoices, and other billing info

arrow To provide you with information of offers and other benefits




Overall Rating



Our Amazing Features


On Time Delivery

Our writers make sure that all orders are submitted, prior to the deadline.


Plagiarism Free Work

Using reliable plagiarism detection software, only provide customized 100 percent original papers.


24 X 7 Live Help

Feel free to contact our assignment writing services any time via phone, email or live chat.


Services For All Subjects

Our writers can provide you professional writing assistance on any subject at any level.


Best Price Guarantee

Our best price guarantee ensures that the features we offer cannot be matched by any of the competitors.

Our Experts

Assignment writing guide
student rating student rating student rating student rating student rating 5/5

440 Order Completed

99% Response Time

Jack Arens


London, United Kingdom

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 5/5

285 Order Completed

99% Response Time

Eugene Baranowski

MBA in Supply Chain

London, United Kingdom

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 5/5

203 Order Completed

97% Response Time

Richard Alpert

PhD in Psychology

London, United Kingdom

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 5/5

1592 Order Completed

96% Response Time

Jane Sima

Ph.D in Psychology with Specialization in Industrial-Organizational Psychology

Singapore, Singapore

Hire Me

FREE Tools


Plagiarism Checker

Get all your documents checked for plagiarism or duplicacy with us.


Essay Typer

Get different kinds of essays typed in minutes with clicks.


GPA Calculator

Calculate your semester grades and cumulative GPa with our GPA Calculator.


Chemical Equation Balancer

Balance any chemical equation in minutes just by entering the formula.


Word Counter & Page Calculator

Calculate the number of words and number of pages of all your academic documents.

Refer Just 5 Friends to Earn More than $2000

Check your estimated earning as per your ability




Your Approx Earning

Live Review

Our Mission Client Satisfaction

I had a good mark was done professionally and referenced ...


User Id: 356772 - 28 Mar 2020


student rating student rating student rating student rating student rating

A very good job done. However, it took the expert so long to get it right. Remember my due date for this project was 22nd of March, 2020 and I got the right delivery on the 28th of March,2020.


User Id: 375353 - 28 Mar 2020


student rating student rating student rating student rating student rating

They are genuine. And respond to all the queries quickly .And I received my assignment within specified time.


User Id: 388721 - 28 Mar 2020


student rating student rating student rating student rating student rating

Unable to provide the full feedback now as Lecturer have not responded. As of now, I am satisfied with the service provided and hope to have a good response from Lecturer. TQ


User Id: 331877 - 28 Mar 2020


student rating student rating student rating student rating student rating
callback request mobile
Have any Query?