Auditing and Assurance in Australia - Audit Partner Rotation Impact

This report delves into the effects of audit partner rotation in Australia, exploring its impact on audit fees, financial reporting, and audit quality. The study examines both mandatory and voluntary audit partner rotations, highlighting the relationship between partner turnover and audit fees. It discusses the costs and benefits associated with partner rotation, including the potential for improved quality and the challenges of partner unfamiliarity with clients. The research also considers the influence of audit partner rotation on various sectors and includes a discussion on the disclosure of partner names in audit reports, a practice unique to Australia. The analysis considers the significance of audit partner rotation in enhancing the audit practices and provides insights into the complexities of audit partner rotation. The report concludes by discussing the benefits of the audit partner rotation and how it is cheaper to rotate the audit partners than rotating the audit firm.

Running head: AUDITING AND ASSURANCE IN AUSTRALIA
Auditing and Assurance in Australia
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1AUDITING AND ASSURANCE IN AUSTRALIA
Auditing and Assurance in Australia
The benefits and cost of rotating partners are as follows:
The rotation of partners and audit fees has a significant relationship. The higher the audit
fees will affect both the voluntary and mandatory audit partners rotating. The audit rotation is
becoming a practice in many jurisdictions in enhancing the audit practices. The auditor partner
can become unfamiliar to the client management if the rotation takes place often. Audit partner
rotation is cheaper than the audit firm rotation. If there is independent working of the auditors
then it leads to the improved quality and financial reporting.
Audit Quality Concepts
It is seen that the cost and the benefits of the audit partners’ rotation is very restricted as
no proper data is received. This is also restricted because only few countries have disclosure of
company’s audit. In Australia the audit partners rotate on every five years. The rotation is
mandatory if the partner is in charge of the audit after five years and it is voluntary if it is for
short tenure. Australia is one of the countries which disclose its partners name in the audit report.
There is an association of mandatory and voluntary audit. There is also evidence which shows
that there is a difference between audit fees and rotation in Australia extending the research that
is found that the research varies across the sectors.