INCREASED AUDITOR INDEPENDENCE BY EXTERNAL ROTATION AND SEPARATING AUDIT AND NON AUDIT DUTIES? - A NOTE ON THE EUROPEAN AUDIT REGULATION

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Patrick Velte ORCID logo, Marc Eulerich ORCID logo

DOI:10.22495/jgr_v3_i2_p5

Abstract

The European audit reform contains the implementation of an external mandatory auditor rotation (audit firm rotation) and a separation of audit and non audit duties to increase auditor independence. The central question is, whether these regulation measures are connected with an increased accounting and audit quality. First, this article presents an agency theoretical foundation of auditor independence. Then, a state of the art analysis of empirical research illustrates these ambivalent results, so that the economic need for the audit market regulation in Europe is controversial.

Key Words: Low Balling, Audit Quality, Empirical Audit Research, Auditor Independence, RotaTion, Audit Market Concentration, Consulting, Audit Fees, Principal Agent Theory, Expectation Gap

How to cite this paper: Velte, P., & Eulerich, M. (2014). Increased auditor independence by external rotation and separating audit and non audit duties? - A note on the European audit regulation. Journal of Governance and Regulation, 3(2), 53-62. http://doi.org/10.22495/jgr_v3_i2_p5