Impact of audit firm rotation on audit quality: Evidence from Bhutan

Abstract

This research study examines the effects of audit firm rotation on audit quality for non-financial public listed companies in Bhutan. Currently, Bhutan has only 21 companies listed on the Royal Securities Exchange of Bhutan Limited (RSEBL). Secondary data obtained for the period of 10 years, between 2009 to 2018, were analyzed using regression analysis. Abnormal Working Capitals Accruals (AWCA) has been used as proxy for audit quality. The study concludes that audit firm rotation has an insignificant but positive relation with AWCA. Thus, in Bhutan audit firm rotation does not affect audit quality for non-financial public companies, which are in tune with prior studies. Further, it was observed that there is an insignificant relation between AWCA and all control variables with the exception of growth. Growth has a decreasing trend at the rate of-0.13 percent while the trend analysis of AWCA shows that audit quality of non-financial public listed companies has been increasing at the rate of 21.01 percent which is an indirect evidence of low audit quality.