Auditor Rotation: Is the Concept Coming Back?

Evidence Collection Procedures” Please respond to the following:

April 17, 2018

Auditor Rotation: Is the Concept Coming Back?

We haven’t heard much about auditor rotation since the PCAOB’s concept release about that topic in 2011. That concept release didn’t go too far due to controversy. But at GE, proxy advisors appear to be taking a closer look at the company’s longstanding relationship with its auditor. Here’s the intro from Cydney Posner’s blog (also see this WSJ article):

Use the Internet to research at least two (2) companies that have experienced downgrades related to stock performance or bond ratings within the last five (5) years. Next, analyze the primary ways in which auditors would use the information from downgrades to assess business risk or evaluate the likelihood that the downgrades would impact the auditor’s assessment of the client’s business environment. Ascertain the major ways in which this information would impact the audit risk model equation. Support your position.

According to an article in the CPA Journal, the auditor considers reliability of audit evidence collected and the reliability of that evidence to reduce the risk of financial statements containing undetected material errors. Compare and contrast at least two (2) types of evidence, and make a recommendation as to which you believe is the most reliable in reducing risk. Support your position.