Mandatory audit firm rotation : the perception of Malaysian public listed companies / Suriana Mamat

Auditor independence is very crucial to public confidence in financial reporting.
However, recent corporate failure such as in the case of Enron has critically
damaged the credibility of financial reporting. Lack of auditor independence due
to long-term relationships between auditor and clients is believed to be the reason
for such failures. Therefore, mandatory audit firm rotation has always been
proposed as a solution to enhance auditor's independence. This study aims to
provide some viewpoints on whether mandatory audit firm rotation should be
implemented in Malaysia considering that some countries have good experiences
with it such as Italy. This study examines the value provided by mandatory audit
firm rotation from the perspectives of the Chief Finance Officer of public listed
companies in Malaysia. This study is based on a survey using questionnaires in
order to gather the information. A total of 30 out of 100 companies re'sponded to
the survey. The results indicate that mandating audit firm rotation will enhance
auditor independence as perceived by the respondents. However, the respondents
believe that the costs outweigh its intended benefits.