Discuss the arguments for and against compulsory audit firm rotation Essay

Discuss the arguments for and against compulsory audit firm rotation and also for and against a total ban on audit companies(by which is meant firms of accountants) carrying out non-audit services - Essay Example the perspective of having an audit firm safeguard their rights where the key objective of the audit firms has become the maximization of profit, where they mostly only look to cover their own risk. The Enron and World Call scandal gave rise to a controversy where the auditors actually provided a helping hand to their audit client in carrying out and concealing fraud and other deceptive acts which resulted in huge losses to the shareholders, the employees and other related stakeholders alike. These incidents not only affected the companies but also prove to be an alarming event for the audit firms as well as the regulatory bodies to enhance their capabilities in providing a safeguard to the rights of the shareholders as well as other associated individuals. This also provided a need for the regulatory bodies to take some stringent measures in implementation of controls for appointment and rotation of auditors as well as the restriction of audit companies to be involved in provision of non-audit services to their clients which overshadows the social responsibility of the auditor and turns it in to a business perspective. The recent incidents of corporate frauds have mobilized the regulatory bodies in the United Kingdom to establish and implement controls governing the audit of companies listed in the London Stock Exchange, which ensure that the auditors don’t stay long enough at a certain client where such a relationship is established between the two, where the auditor may disregard the social responsibility to safeguard the rights of the stakeholders. The main causes of impaired independence, which can be cured by audit rotation, are persistent close relationship with the client, keenness to satisfy the client and fear of losing the client where any fraud related issue is identified during the audit. If the audit company is rotated from time to time, the audit company will not have to fear for losing the client in case it highlights or reveals any fraud,