Quote by Robert Pozen

Mandatory auditor rotation is designed to address a potential conflict of interest between a public company and its auditor. Because an auditor is hired and paid by the public company it audits, the auditor's desire to maintain a good relationship with its client could conflict with its duty to rigorously question the client's financial statements.

Mandatory auditor rotation is designed to address a potentia

Summary

This quote explains the purpose of mandatory auditor rotation. It highlights the potential conflict of interest that arises when a public company hires an auditor who is paid by the company itself. In such cases, the auditor may be reluctant to perform thorough and rigorous questioning of the company's financial statements in order to maintain a good client-auditor relationship. Mandatory auditor rotation helps to mitigate this conflict by enforcing the periodic change of auditors, reducing the likelihood of a long-standing relationship that may compromise the auditor's independence and objectivity.

Topics

Relationship

By Robert Pozen

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