Audit Firm Rotation Independence and Other Matters

Audit firms play an important role in society. They are entrusted by law to conduct statutory audits of public-­interest entities with a view to enhancing the degree of confidence of the public in the annual and consolidated financial statements of such entities. The financial crisis has highlighted weaknesses in the statutory audit especially with regard to Public-Interest Entities. Given that many banks revealed huge losses from 2007 to 2009 on the positions they had held both on and off balance sheet, it was difficult for many investors and the European legislators to understand how auditors could have given clean audit reports to their clients (in particular banks) for those periods.

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