A common assumption is that rotation of audit firms increases audit quality. Audit
quality is defined as the auditor’s ability to discover a breach in the client’s accounting
system combined with the auditor’s willingness to report such a breach (DeAngelo,
1981; Watts & Zimmerman, 1981). Whereas the ability to discover a breach relates
to the technical competence and expertise of the auditor as well as to the audit
procedures and the extent of sampling, the willingness to report is determined by the
auditor’s independence, objectivity and professional scepticism. Independence requires
‘independence in fact’, defined as a state of mind that is:
• unaffected by influences that might compromise professional judgement; and
• allows an individual to act with integrity and to exercise objectivity and professional
scepticism (International Federation of Accountants, 2004: 17).2
Hence, it is concluded that audit quality and auditor independence are closely
intertwined, particularly when examined with respect to the auditor-client relationship
(i.e. tenure and rotation).