Auditor Switching and Initial Audit Procedures: A Case Study

Abstract

This paper discusses the reasons behind auditor or accounting firm switching and studies initial audit procedures. Auditors need to analyze the real reason behind auditor switching in order to make an appropriate decision during the client acceptance stage (an auditee’s willingness to share the real reason for auditor switching is questionable). Broadly speaking, there are two types of auditor switching: mandatory and voluntary. Our finding shows that the main driver of voluntary auditor switching for the specific firm studied in this case (referred to with the alias “Superannuation 12”) was to improve audit quality. A first-year audit will most likely have a higher risk than a recurring audit so auditors need to add several extended audit procedures as safeguards. These extended audit procedures should be properly implemented in all of the audit stages, except reporting stage. Therefore, the audit period for an initial audit is longer than for a recurring audit. The auditing firm involved in this case (referred to as “AP 111”) had some problems when performing initial audit procedures, which led the author to several suggestions for how this could be addressed authorities and the accounting firm itself. Keywords—accounting firm switching; auditor switching; communication with previous auditor; first-year audit; initial audit procedures.