Date of Graduation


Document Type


Degree Name

Bachelor of Science in Business Administration

Degree Level





Rowe, Stephen


Regulators continue to debate the effectiveness of mandatory auditor rotation versus mandatory auditor retention in improving audit quality. Recent regulation in the European Union mandates auditor rotation, but if companies choose a more-lenient auditor with each switch, frequent switching could impair audit quality. I examine whether more-frequent switching leads to an increase in aggressive reporting and evaluate its effect on audit quality and audit attention. I find that audit quality decreases as the number of switches increases, with the results being driven mainly by switches between non-Big 4 audit firms. I also find that frequently switching between non-Big 4 auditors is accompanied by higher fees, longer audit opinion delays, and a higher probability of filing late. In contrast, frequent switching among Big 4 firms is associated with lower fees, suggesting the presence of price cutting. In additional analyses, I find no evidence of opinion shopping among non-Big 4 firms but find that opinion shopping may be occurring among Big 4 firms to prevent internal control material weakness opinions. Collectively, my findings suggest that mandated auditor rotation may negatively impact audit market efficiency.


Accounting, Auditor Switching, Audit Quality, Audit Attention, Opinion Shopping, Big 4

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Accounting Commons