The Best Argument Against Mandatory Audit Firm Rotation Is That

question 41

Multiple Choice

The best argument against mandatory audit firm rotation is that:

• A) Audit fees will tend to increase when a highly qualified and experienced auditor is arbitrarily forced to stop serving an audit client
• B) It will lead to undignified competition as unprincipled successor auditors reviewing a predecessor auditor's work will be publicly critical of the predecessor to bolster their own reputations
• C) The "learning curve" efficiencies achieved by the first audit firm will be sacrificed when a new, inexperienced successor auditor is appointed
• D) The ethical leadership provided by large CPA firms will be diluted by the market entrance of newer, more aggressive competitors

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Definitions:

Type I Error

The incorrect rejection of a true null hypothesis, also known as a "false positive".

True Null Hypothesis

The hypothesis that there is no effect or no difference, and it truly reflects the reality in the population sampled.

Rejecting

In statistics, it often refers to the act of discarding the null hypothesis based on the evidence of a test.

Type I Error

A Type I error occurs when a true null hypothesis is incorrectly rejected, often denoted as a false positive in hypothesis testing.