Review on the mandatory rotation of auditor

After bankruptcy of such companies as Enron and WorldCom, the legislature and regulatory institutions paid attention to the role of auditors and their rotation. The sections 203 and 207 of Sarbanes Oxley’s Act (2002) have been allocated to the prohibition of more than 5 years tenure by audit partners and doing research about mandatory rotation of audit firms. The supporting arguments for mandatory rotation are summarized in upgrading the auditor's independence and decentralization in audit market. Contrary to that, related studies makes clear that this action not only does not culminate in improving the quality of auditing but also it will increase the costs of auditing due to the necessity of collecting evidence and knowledge in the early years of auditing. Also decentralization in the market will culminate in decreasing the opportunities for small auditing firms because of competition and endangers the auditor's job security. In other words, the effective auditing will not be realized