Effect of mandatory audit firm rotation on quality of independent audit: An application in İstanbul Stock Exchange

Mandatory rotation in the mandatory audit is a solution that is offered with SOX Law to restore the trust for the quality of independent audit that is damaged by financial scandals which have emerged as from in the early days of 2000's. However, the discussions about whether the manner of application of mandatory rotation affects the quality of independent audit still continue in developing countries and EU countries, notably the USA. Therefore, it is important to research the effect of applying mandatory rotation in the shape of audit firm rotation and/or auditor on the quality of the audit. The aim of this study is to survey whether mandatory audit firm rotation has an effect on the quality of the independent audit. Least squares regression method was used in this study was actualized in the sample of manufacturing industry companies which was traded at the exchange between 2010-2016 years in BIST. Mandatory audit firm's rotation was compared with companies which perform voluntary audit firm rotation and also the companies which do not perform an audit firm change. It is seen with reference to the research findings that mandatory audit firm rotation has a positive effect on the quality of audit represented by discretionary accruals. Keywords: Mandatory Audit Firm Rotation, Quality of Independent Audit, Discretionary Accruals.