How do rotation policies support auditor independence?

• A. Rotation of the lead audit partner and restrictions on non-audit services.
• B. Rotation of the CFO.
• C. Eliminate external audits.
• D. Management selects the auditors.

Answer: (A)

Rotation policies support auditor independence by directly addressing threats that arise from long-standing auditor-client relationships. Rotating the lead audit partner helps reduce the familiarity threat, preventing complacency and ensuring ongoing professional skepticism when evaluating management’s judgments. It also brings a fresh perspective that can challenge assumptions and improve objectivity. When combined with restrictions on non-audit services, it lowers self-review and advocacy threats, since the auditor isn’t embedded in providing a mix of services that could compromise independence or create incentives to please the client.

Other options don’t address independence in the same way. Rotating the CFO doesn’t affect the auditor’s independence because the CFO is part of management, not the auditor. Eliminating external audits would remove the independent assurance function altogether. Allowing management to select the auditors creates a clear risk of biased choice and reduced objectivity.