CPA Exam — AUDEthics, Professional Responsibilities, and General PrinciplesEasy
A CPA firm has established a policy requiring all audit engagement partners to rotate off engagements after seven consecutive years. This policy is primarily intended to enhance which aspect of audit quality?
- ATimeliness of reporting.
- BEfficiency of the audit.
- CProfessional skepticism.
- DClient satisfaction.
Show answer & explanationAnswer & explanation
Correct answer: C. Professional skepticism.
Partner rotation policies, mandated for public companies and often adopted voluntarily for others, are designed to prevent over-familiarity with the client, thereby fostering greater professional skepticism and independence in appearance.
Why the other options are wrong
- A. Rotation does not directly impact the timeliness of reporting, and can sometimes cause slight delays initially.
- B. Rotation can sometimes decrease efficiency initially due to new personnel learning the client.
- D. Client satisfaction is not the primary driver for partner rotation; it's audit quality.
Partner Rotation
The requirement or policy for audit partners to rotate off an engagement after a specified number of years to enhance independence and objectivity.
- Mandatory for lead and concurring partners on public company audits (5 years).
- Aims to prevent over-familiarity threat.
- Supports professional skepticism and independence.
Memory trick: Quality audits need fresh pairs of eyes, to catch all the financial lies.