Investigating the impact of Mandatory Audit Firm Rotation on Audit Fee and Audit Market Competition

Document Type : Research Paper



This study aims at investigating the impacts of Mandatory Audit Firm Rotation (MAFR) on audit fees and audit market compeition among firms listed on Tehran Stock Exchange (TSE). Since 2007 firms listed on TSE are not allowed to use services of any single audit firm for more than 4 consecutive years. We tested our hypotheses using multivariate regression analysis and mean comparison test. Our sample consists of 95 firms listed on TSE during the period 2006-2014. Our results, in summary, revealed that MAFR has cuased a significant increase in audit fees, more than the usual additional fees charged in first year audit in voluntarily audit firm rotations; and, therefore has imposed additional audit costs to firms. Also, there were no statistically significant changes in market share of high-quality renked audit firms and those of lower quality ranks, before and after imposition of MARF rule in Iran.


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