Effects Of Rotation On Auditor Independence And Quality Of Audit Service In Malaysian Banking IndustryThis study highlights the nature of auditor rotation in the Malaysian banking industry and its effects on auditor independence and quality of audit se

Abstract

This study highlights the nature of auditor rotation in the Malaysian banking industry and its 
effects on auditor independence and quality of audit service in the industry. To generate 
primary data for analysis, interviews were conducted on officials of two banking institutions 
and one accounting/audit firm. The study finds that there have not been significant changes in 
the annual appointment of auditors in the Malaysian banking institutions over the last ten years, 
suggesting that there is a good working relationship between the auditors (especially the Big4) 
and the banks. This allows room for continuous debate on the need for mandatory rotation as a 
means for ensuring auditor independence and high audit quality in the Malaysian banking 
industry. In the absence of statutory/mandatory requirement for auditor rotation, it is 
recommended that the Malaysian banking institutions should be carefully evaluating the impact 
auditor rotation would have on the quality of audit work on their current and future financial 
statements, as they decide whether to rotate their auditors or not.