Public confidence in the sort of financial information issued by various companies has been badly shaken. The confidence can be restored only when auditors' 'independence' is made free from vested interests.

In pursuit of the lucrative consultancy business, audit function was downgraded and auditors, as pointed out by a former Secretary General, International Accounting Standards Board (David Cairns) in his book "IAS Survey 2000", awarded "clean bills of health" to companies even though the financial statements were not fully compliant with the accounting standards.

"Most of Xerox's accounting violated generally accepted accounting principles (GAAP). The accounting function was just another revenue source and profit opportunity," said US Security Exchange in court filing against Xerox.

Weiss Ratings, a leading US rating company, found (2001-02) that out of 228 companies audited by the Big Five, 194 went bust in a year and 94 per cent of the companies that were given 'clean health certificate' were subsequently cited for serious irregularities and shareholders suffered an aggregate loss of almost $1.3 trillion."

Long association with an entity is an auditors' Achilles heel. 'Long association makes people nervous', pointed out the Financial Times and Sir Howard Davies of UK FASA observed: "concerns have grown about the dangers of auditors colluding in bad accounting practices because they have become too close to their clients.'

Some, however, point out that sufficient empirical evidence does not exist to conclusively prove that long association affects auditors' independence. It is no more a valid plea.

The professional trade association, that is, the International Federation of Accountants (IFAC) has now accepted the long association affects and the threat it poses. The mayhem should end now. (Consider in this behalf the consequences of the same audit firm's 100 years long association with Natwest bank till its take-over by the Bank of Scotland.)

Both the IFAC and the profession now agree to the need for changing engagement partner after a certain given period of time. Seemingly this is a policy of spin, demonstrably a sort of policy announcement and a voodoo cure.

This is a relay race where one team member would hand over the baton to the next team member. Even if one suspends disbelief Caesar's wife would not in any case be above suspicion.

Clearly, no partner would do anything that loses the client and stake his career. Nor would he ever pull skeletons from the closet of his colleague firm. Further, other personnel engaged on the audit team should be no less affected and may do all in their sphere of functions that long association is now admitted to lead to.

The change of the engagement partner is thus no effective remedy for this reason as well. The change of engagement partner does not address the risks but it would be accepted only when events overtake.

Of course, the most difficult thing in life is to understand the obvious. We accept a truth only after we have first wholeheartedly rejected it. Both the IFAC and the profession did not concede that consultancy business impaired independence till Enron scenario hammered the fact.

Further, Theodore Eisenberg and Jonathan Macey, two law Professors at Cornell University on the basis of their extensive research in 2003 have noted that "auditors become more and more reliant on big customers that, in turn, risked undermining the idea that an auditor should value accounting principles and its reputation above the loss of a client." As Francis Fukuyama observed when one has a chance to engage in what Adam Smith called 'gain', doing so is a fairly universal characteristic.

World Com scandal came to light only after another firm had been brought in to replace Andersen. "Auditors' change leads to a 'new broom' approach- the knowledge that another accountancy firm must take over after a fixed period is likely to encourage a more searching and skeptical audit, if only to prevent costly embarrassment in the wake of the new broom," points out Chris Dickson, executive counsel, Joint Disciplinary Scheme, the UK's Institutes of Chartered Accountants.

"When I ran the (Audit) Commission I found it (audit rotation) a helpful discipline, and one which had the useful effect of making auditors more ready to challenge their clients." observes Howard Davies Chairman, UK Financial Services Authority.

A mid-February 2002 survey of the UK's financial directors revealed that 57% of respondents believed that companies should be compelled to rotate their auditors.

Professors Arrunada and Paz-Ares of Spain in their report 'Economic consequences of mandatory auditor rotation', however, conclude (1995) that continuity of the auditor over time increases the likelihood that any wrongdoing by the client management will be discovered and that mandatory rotation may actually harm auditor independence.

The events and the acceptance by the International Federation of Accountants (IFAC) of long association as a threat to independence prove their findings were wrong. As for their premise that rotation could harm independence it remains untested as yet.

Some have termed mandatory rotation to be 'draconian measure.' Gerry Acher, KPMG senior partner said rotation would lead to 'massive amount of disruption'. Kieran Poynter, UK's Price water house coopers' (PWC) senior partner, has termed it as 'fatally flawed,' which would reduce the quality of audit and double audit cost as well."

One just doesn't know how or why rotation is draconian? The civil society has a right to set up a 'norm' to save itself from heavy adverse costs imposed on it by a segment of the society.

Others point out that the rotation usurps the inalienable right of shareholders to appoint the auditors. It is an "unwarranted restriction on the freedom of companies to choose their own auditors," observed Professor Ramsay of Australia in his report (2001) on auditors' independence.

It is, indeed, a fairy tale. It is an admitted fact as scores of annual general meeting notices to shareholders show that shareholders toe the line of management and vest it with powers not only to appoint auditors but also fix their fee..

Some others have pointed out that rotation would affect the quality of audit. But the fact is that the issue has occupied the center piece because the audit quality had awfully worsened e.g., Public Company Accounting Oversight Board (PCAOB) has unearthed as late as June 2004 "significant audit and accounting issues" in audits conducted by the Big Four accounting firms.

It is also said that rotation would disrupt work. Even if t is so, cost-benefit ratio neutralizes this snag. It might as well be tackled by inducting the incoming auditor one year before the end of term of the engaged auditor audit to work as joint auditor during the tenure-end year.

A common plea is that rotation would increase fee, which is indeed the most puzzling part of professional argument against rotation. The profession has no cause to resent it. This is a matter of choice by those who pay. The increased fee would yet be negligible in absolute terms as compared to other revenue expenses.

Further, the increase shall have great cost-benefit ratio. It would assure a better quality information instead of present moth eaten, polluted information. Discussing rotation-related cost-increase issue, the Economist observed: "But higher prices are by no means most serious danger reform poses ... the real threat is that accounts may be properly audited."

Few point out that change of auditors cannot be superimposed; it needs to be proposed by a shareholder. This sheer legal nicety is belied by the fact that the Government of Pakistan appoints the auditors in the case of public sector companies.

It is gathered that in India as well, the auditors for the banks are appointed and remunerated not by the shareholders but by the Reserve Bank of India (RBI). and the auditors report both to RBI and the bank.

Moreover, where general social good is involved, legal niceties should really be no impediment. Legal or personal rights presuppose adherence to 'good citizen ethics. So, if a legal right is misused to stand on other's toes, it ought to be trimmed.

As is known, 'Enron' hasn't arrested the ethical drift. The Public Companies Accounting Oversight Board's initial inspection in 2003 of Big Four audits has found "significant accounting issues" and also identified instances in which they failed to follow generally accepted accounting principles, or GAAP," its chairman recently told Congress.

One more of the Big Four might go out, he has apprehended. If this is the measure of discipline in the US where the pressure for oversight is most heightened it should not be untrue to conjecture that the state of affairs in the Third World should be indeed worse.

The Institute of Chartered Accountants India also on its own motion has introduced mandatory rotation of auditors without any amendment in the companies act by appropriate modifications of its code of conduct.

In Pakistan too, the auditors of public sector companies, as mentioned above, are rotated. It is beyond logic to hold while it doesn't matter there it does in private sector. Isn't or shouldn't what's sauce for the goose is the sauce for the gander as well?

As observed by the South African Finance Minister "It is not a question of whether or not firm rotation should be introduced but rather how often the firm rotation should occur."