A structured literature review of empirical research on mandatory auditor rotation

Abstract

This study reviews 128 empirical studies on mandatory auditor rotation (MAR) in light of the long-standing debate on the effectiveness of MAR and the different regulatory choices made worldwide over time. A structured literature review was conducted to address three research questions. How has empirical research on MAR developed from 2000 to 2022? What is the focus and critique of the empirical research on MAR? What is the future of MAR empirical research? The findings reveal growing empirical evidence on MAR. However, this evidence is fragmented and country-based. Scholars have primarily focused on audit firm rotation rather than audit partner rotation. While quantitative research based on archival data predominates, survey questionnaires prevail in a few regions. Evidence on how MAR impacts auditor independence, the auditor–client relationship, and audit market concentration is scant, whereas audit quality is the most investigated research question. Nonetheless, assessing whether MAR benefits audit quality remains challenging because the research outcomes depend on the research question, rotation type, research method, and regulations enforced in the empirical setting. Based on this comprehensive and rigorous overview of worldwide MAR empirical research, knowledge gaps are underlined, avenues for future research are suggested, and warnings are issued to shareholders and policymakers.

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