Does auditor tenure improve audit quality?
In this study, we provide evidence that the relation between auditor tenure and audit quality, proxied by discretionary accruals and earnings response coefficients, is conditional on auditor specialization and client importance (in terms of economic contribution to the public accounting firm’s in...
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| Main Authors: | , |
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| Other Authors: | |
| Format: | Research Report |
| Language: | English |
| Published: |
2008
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| Subjects: | |
| Online Access: | http://hdl.handle.net/10356/14562 |
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| Institution: | Nanyang Technological University |
| Language: | English |
| Summary: | In this study, we provide evidence that the relation between auditor tenure and audit
quality, proxied by discretionary accruals and earnings response coefficients, is
conditional on auditor specialization and client importance (in terms of economic
contribution to the public accounting firm’s income). We find that longer audit tenure is
associated with higher audit quality in the case of firms audited by specialists that have
low fee dependence on clients, but that the tenure-audit quality relation is either weaker
or absent in the case of firms audited by non-specialists and/or those where the auditor
has a high fee dependence. These results indicate that benefits of long auditor-client
relationship in improving audit quality are greatest when the auditor has industry
knowledge and lower economic bonding with the client. |
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