Audit Analytics has released research to assist the discussion of mandatory auditor rotation, a topic that will be featured at the PCAOB meeting on March 21st and 22nd.

The research examined the restatements and auditor changes disclosed by the Russell 1000 companies to determine if auditor changes played a part in the discovery of outstanding accounting misstatements.

Highlights from the research include:

• About 7.5% of the Annual Restatements linked to an auditor departure were detected, in part, by the "fresh eyes" of the newly engaged auditor.

• About 64% of the Annual Restatements linked to an auditor departure were detected prior to the auditor's departure ("no fresh eyes").

• About 15% of the Annual Restatements linked to an auditor departure were detected by the companies themselves or their regulators, such as the SEC ("no fresh eyes").

• About 13% of the Annual Restatements linked to an auditor departure were restatements that corrected misstatements, which occurred after the new auditor's engagement (no restatement of work during predecessor auditor engagement).

Click to view the report:
A Restatement Analysis Of The Russell 1000 Companies: The Extent To Which The "Fresh Eyes" Of A Newly Engaged Auditor Provided Assistance In The Discovery Of The Misstatement.