Examiners' recognition on effect of obligatory review firm pivot on reviewer autonomy: A case study in Bahrain

Abstract

The current study examined several issues regarding auditor independence from the perspective of an
emerging market such as Bahrain. Factors affecting the ability of auditors to remain independent
include long audit tenure, financial dependence on a single audit client, non-audit services provided to
audit clients, ex-auditor employment with an audit client and the existence of audit committees. It is
therefore timely to examine the importance of auditor independence in the provision of reliable and
credible financial information. The current study uses a questionnaire survey to examine auditors’
perceptions of the impact of mandatory audit firm rotation on auditor independence. The results of the
study revealed that the majority of auditors agreed that MAR could safeguard auditor independence.
The results also reveal that there is a significant relationship between mandatory audit firm rotation
and auditor independence. Analyses of variance (ANOVA) were also conducted to test for the
possibility of confounding effects arising from participants’ background and experience. None of
these variables were found to have a confounding effect on the experimental results. The results also
reveal that the adoption of rotation rules wasn’t given enough attention among the auditing firms in
Bahrain.