The Effect of Auditor Tenure on Audit Independence in Botswana (original) (raw)
International Journal of Innovative Research and Development
Background of the Study Investors continue to loose their investment due to weak form of market effeciency in providing investment information. The Audit function cannot be spared as a key involved party. The primary concerned areaa is the internal control weaknesses, disagreements on accoounting, inability to rely on management, scope limitation, unauthorised opinion, and illegal acts. The refelection of theses types of deficiences seen on company's accounting and Audit system which in the long run hampered the reported financial results. Independence impared and cost reduction reasons could have implications for the audit hence the need for change of auditor arises. As a way of mitigting such challenges, mandatory audit firm rotation has been welcomed by the Botswana Accountancy Oversight Authority (BAOA) with effective from 1 st January 2019 (BAOA, 2019). BAOA went on to agree on terms of MAFR after considering and consulting with its local stakeholders who are mainly the Public Interest Entities (PIEs), its regional peers in South Africa and Mauritius, and eventually, internationally with its European Union and United Kingdom counterparts who all have already adopted MAFR. The shortage of accounting and auditing skills in Botswana ahd been highlighted by the MAFR adoption, BAOA (2019). They recommended that there should be no rotation of senior audit staff other than the Engagement Quality Control Review (EQCR), and the lead partner. Proponents of mandatory audit firm rotation argue that long-tenure relationships between audit firms and clients can lead to audit failures due t o high levels of familiarity that impair auditors' independence and professional skepticism (Moore et al. 2006, Gavious, 2007). Opponents of mandatory audit fim rotation argue that long tenure auditor-client relationships lead to valuable client and industry specific knowledge over time resulting in enhanced audit quality. Short tenure may be problematic as audit firms try to build relationships with their clients, and mandatory rotation likely would be a hinderance to such a relationship (PCAOB 2011b, 2011c). A lack of familiarity may have adverse consequences, which could be exacerbated by insituting mandatory audit firm rotation (Roush et al, 2011). The primary purpose of this study is to investgate Botswana corporate community's perspective on the issue of the recent changes in the Auditor tenure and how it impacts on auditor independence and financial reporting quality. The researcher endeavors to improve the understanding of the underlying reasons behind the positions of audit committee members on mandatory audit firm rotation. The study also examines how audit committee members currently ensure auditor independence and objectivity and how audit committee chairs maintain and monitor a series of important relationships including the audit committee-external auditor relationship, the audit committee-financial management relationship, and the external auditor-financial management relationship. Finally the study explores audit committee members' views on the costs associated with switching audit firms.