Mandatory Audit Partner Rotation: Perceptions of Audit Quality Consequences

This paper summarizes our study, “An Examination of Partner Perceptions of Partner Rotation: Direct and Indirect Consequences to Audit Quality” (Daugherty et al. 2012). The study examines the perceptions of practicing audit partners with respect to mandatory partner rotation and cooling-off periods, in general, and how the more stringent partner rotation rules mandated by the Sarbanes-Oxley Act may negatively impact audit partners' quality of life at the expense of audit quality. The results suggest that mandatory partner rotation increases partners' (and other engagement team members') workloads, as well as the likelihood of partner relocation. In response to the Sarbanes-Oxley Act and the SEC's acceleration of mandatory partner rotation and extension of cooling-off periods, the partners participating in this study indicate that they would rather learn a new industry than relocate. Importantly, partners perceive that audit quality suffers from retraining, but not from relocating. Taken together, the study's results suggest that the partner rotation provisions create an unintended consequence—specifically an indirect, negative impact on audit quality.