As I explained in my book The Complete Guide to Sarbanes-Oxley:
SOX § 203 requires registered public accounting firms to rotate (1) the partner having primary responsibility for the audit and (2) the partner responsible for reviewing the audit every five years. The audit committee must ensure that the requisite rotation actually takes place.
There now appears to be evidence that rotating audit partners does contibute to improved disclosure:
The main purpose of audit partner rotation is to bring a "fresh look" to the audit engagement while maintaining firm continuity and overall audit quality. Despite mandatory audit partner rotation being required in the U.S. for over 35 years, to-date there has been limited empirical evidence speaking to the effectiveness of U.S. auditor partner rotations given that audit partner information is not disclosed in U.S. audit reports. Using SEC comment letter correspondences to identify U.S. audit partner rotations, we provide initial evidence among publicly-listed companies suggesting that audit partner rotation in the U.S. supports a "fresh look" at the audit engagement. Specifically, we find that audit partner rotation results in substantial increases in material restatements (129 to 135 percent) and write-downs of impaired assets (one percent of market value). Overall, these findings suggest that audit partner rotation supports auditor independence and is an important component of quality control for U.S. accounting firms.
Citation: Laurion, Henry and Lawrence, Alastair and Ryans, James, U.S. Audit Partner Rotations (October 27, 2014). Available at SSRN: http://ssrn.com/abstract=2515586
Note that this result does not support audit firm rotation. As I also noted in my book Complete Guide to Sarbanes-Oxley: Understanding How Sarbanes-Oxley Affects Your Business, as a matter of good practice, a company ought to consider rotating audit firms periodically so as to get the benefit of a fresh set of eyes. Some corporate governance experts recommend doing so at least every ten years. In addition, governance experts recommend rotating audit firms if a substantial number of former company employees have gone to work for the audit firm or vice-versa.
But should good practice be made mandatory?
My concern is that consolidation of the accounting profession has made auditor rotation extremely difficult. As I explained in my book Complete Guide to Sarbanes-Oxley: Understanding How Sarbanes-Oxley Affects Your Business, SOX prohibits a public corporation from obtaining a wide range of non-audit accounting and consulting services from the accounting firm that performs their audit. Many public corporations get a wide array of such non-audit services from all 3 of the other Big 4 accounting firms. Rotating the auditing firm thus will be pretty complicated, as firms have to reshuffle their non-audit services. It'll be even more complicated if the firms are subject to some sort of cooling off period between when they provide audit services and can begin providing non-audit services (and vice-versa).
One key reform of the accounting profession thus ought to be promoting smaller accounting firms as viable alternatives to the Big 4.