Mandatory audit firm rotation: a structured literature review

Abstract

This systematic literature review responds to the calls in previous literature to understand how Mandatory Audit Firm Rotation (MAFR) evolved post-its implementation. The review further examines the theoretical perspectives used to understand the development of MAFR and the factors that motivate the decisions made by various stakeholders regarding the implementation of MAFR. The main motives behind MAFR implementation are as follows: reduced audit market concentration, improved audit quality, and enhanced auditor independence. This review follows the methodological approach outlined in the SPAR-4-SLR protocol, which enables the systematic assembly, arrangement, and assessment of peer-reviewed academic articles. It employs thematic analysis to analyse the data. The findings reveal that the research has focused predominantly on audit quality, followed by auditor independence, and then audit market concentration. Audit market concentration was the least researched area, but the scholarship finds that MAFR is not the best antidote to resolve it; rather, it intensifies it. Regarding audit quality and auditor independence, the debate remains inconclusive, with no consensus reached on whether MAFR is the most effective solution to address these issues. This review contributes to the MAFR literature by identifying emerging themes and the theoretical drivers that add to the field.