Mandatory audit firm rotation in Spain: a policy that was never applied

Abstract

Purpose

In recent international debates on auditing regulation, Spain has assumed a real prominence as a claimed practical example of where a policy of mandatory audit firm rotation did not work and was duly abolished. This study aims to provide an analysis of the implementation and subsequent removal of mandatory audit firm rotation in Spain in the 1990s.

Design/methodology/approach

This takes the form of historical analysis; the evidence in the paper derives from congressional hearings, financial newspapers and documents produced by the professional associations of auditors in Spain.

Findings

This paper demonstrates that at no stage was mandatory rotation of audit firms ever enforced on Spanish auditors. Further, the revision and subsequent removal of the Spanish law on mandatory audit firm rotation emerge as a rather politicized process, with no evident reference being made in the process of legislative reform to Spanish auditing experiences. The analysis also reveals that at the very time that Spain was being cited internationally for rejecting mandatory audit firm rotation, Spanish political parties and regulators were debating whether to “re‐introduce” such a regulation.

Originality/value

The clear implication of the paper is that considerable caution needs to be taken in today's international‐auditing arena, when analyzing the standpoints and claims made by professional associations and the evidence they provide to support their arguments for and against regulatory reform.

Citation

Carrera, N., Gómez‐Aguilar, N., Humphrey, C. and Ruiz‐Barbadillo, E. (2007), "Mandatory audit firm rotation in Spain: a policy that was never applied", Accounting, Auditing & Accountability Journal, Vol. 20 No. 5, pp. 671-701. https://doi.org/10.1108/09513570710779009