Audit Rotation; Creative Accounting, Audit Independence And Objectivity

Abstract

The debate for audit firms and audit team rotation had been on the increase since the collapse of major multi-national firms in recent years, most scholars and industrialist/ government agents and officials had laid hold on the negligence of auditors to minor acts of creative accounting by managements of such firms, which cumulate into world class frauds leading to economic melt-downs. This study evaluates this claim by using empirical means to determine the effect of audit rotation on creative accounting. Believing that a long relationship between auditors and staff/management of auditee firms will possibly result to auditors compromising standards on minor but intentional acts of fraud and violation of internal control guidelines. It also examine the relationship between audit rotation and independence, objectivity and financial discipline of management. Using the statistical package for social sciences, the researchers used spearman correlation coefficient to test proposed hypotheses of the relationships of the variables. A questionnaire was designed to collect primary data from one hundred and eighty respondents drawn from audit firms and companies in the Niger Delta Region of Nigeria. The result of the analysis shows that audit rotation has a positive effect on creative accounting, audit objectivity, independence and financial discipline. The researchers therefore recommended that audit rotation should be seen by shareholders, relevant regulatory authorities, investors, corporate providers of interest capital and intervention fund along with the Governments as a means of guaranteeing corporate survival in this desperate get rich quick laden economy.

KEY WORDS: Audit, Rotation, Creative, Accounting, Independence and Objectivity