Audit Firm Tenure and Audit Quality: Evidence from U.S. Firms

Brooks, Lily; Cheng, Cheng-shing; Reichelt, Kenneth J.

doi:10.2139/ssrn.2201350

Cited by 20 publications

(19 citation statements)

References 46 publications

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“…This means that there is no significant quadratic influence of AF tenure on audit quality. The results of this study are similar to those of Wahyuni and Fitriany [19] but different from the results by González-díaz, et al [20], Brooks, et al [21] and Fitriany [12] which prove the firm's tenure and quality audit is quadratically related.…”

Section: B Hypotheses Testingcontrasting

confidence: 80%

Analysis of the Implementation of Indonesian Government Regulation Number 20 Year 2015 Related to Tenure and Rotation of Accounting Firms and Public Accountants to Audit Quality

Faisal¹,

Nirmala²,

Fitriany³

et al. 2019

Proceedings of the 12th International Conference on Business and Management Research (ICBMR 2018)

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This study examines government regulations related to public audit services performed by the accounting firm and public accountant as regulated in Government Regulation (PP) No. 20 of 2015, which in this case, eliminates limits for accounting firm (AF) tenure and extends public accountant (PA) tenure from three years into five years. This research also analyzed the previous regulations of the Minister of Finance Decree No. 359/KMK.06/2003, Minister of Finance Regulation No. 17/PMK.01/2008, which are related to the existence of real and pseudo-rotation of AF. This research used 195 non-financial industry companies listed in the Indonesia Stock Exchange with pre-regulation research period is the year 2008-2014 and postregulation is the year 2015-2016. The results show that AF tenure has no quadratic effect on audit quality, while tenure of PA has a concave quadratic effect on audit quality in the post-regulation period. This study also found that the pseudo-rotation of AF had a positive effect on audit quality in the pre-regulation period and did not affect the post-regulation period, while it was not found that the real AF rotation had an effect on audit quality.

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Section: B Hypotheses Testingcontrasting

confidence: 80%

Analysis of the Implementation of Indonesian Government Regulation Number 20 Year 2015 Related to Tenure and Rotation of Accounting Firms and Public Accountants to Audit Quality

Faisal¹,

Nirmala²,

Fitriany³

et al. 2019

Proceedings of the 12th International Conference on Business and Management Research (ICBMR 2018)

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show abstract

“…In part, this fresh look would serve to reset auditor professional skepticism that may have been impacted as a result of the client-audit firm relationship becoming too friendly (AICPA, 1992;Chasan, 2014;Conference Board, 2005;PCAOB, 2011). Other research (Brooks et al, 2012;Chi & Huang, 2005;Davis et al, 2009) argues that mandatory audit firm rotation would be of benefit.…”

Section: Mandatory Audit Firm Rotationmentioning

confidence: 99%

Audit firm tenure, auditor familiarity, and trust: Effect on auditee whistleblowing reporting intentions

2018

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Mandatory audit firm rotation has been researched for decades with resulting opposition as well as support. Research has mainly treated mandatory auditor rotation at the firm macro level. We submit the client relationship length is comprised of firm tenure and audit team continuity, or auditor familiarity. Increased tenure, at the interorganizational or firm level and interpersonal or individual level, has been shown to increase trust; and further, trust is positively related to employee voice, such as speaking up about fraud (whistleblowing). We conduct an experiment examining whether increased audit firm tenure and auditor familiarity leads to increased trust, which enhances the willingness to whistleblow. We find evidence that suggests auditor familiarity enhances trust, which, in turn, positively influences an employee's intentions to whistleblow. This has important implications for the profession and for future research exploring mandatory audit firm rotation; in particular, the need to include auditor familiarity as a construct.

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“…Academic research has searched for evidence to understand whether the tenure of auditors impacts audit quality. In support of the notion that longer tenure reduces audit quality, researchers have found that longer tenure is associated with the reporting of higher discretionary accruals (Davis et al 2009;Brooks et al 2013), significantly higher likelihood of an unqualified opinion (Vanstraelen 2000), and reduced audit quality as measured by quality control reviews for a sample of not-for-profit entities (Deis and Giroux 1992).…”

Section: Auditor Tenure Retention and Resignationmentioning

confidence: 99%

“…Research supports that the accounting firm's tenure on an engagement might adversely affect objectivity if the auditor becomes too cozy with the client (Brooks, Cheng, and Reichelt 2013;Davis, Soo, and Trompeter 2009). Other characteristics of a specific engagement include assessing the level of dependence on the fee structure of a specific engagement.…”

Section: Audit Professionals (Inputs)mentioning

confidence: 99%

Comments of the Auditing Standards Committee of the Auditing Section of the American Accounting Association on PCAOB Concept Release on Audit Quality Indicators, No. 2015-005, July 1, 2015

Rezaee¹,

Abernathy²,

Causholli³

et al. 2015

Current Issues in Auditing

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Audit Firm Tenure and Audit Quality: Evidence from U.S. Firms

Cited by 20 publications

References 46 publications

Analysis of the Implementation of Indonesian Government Regulation Number 20 Year 2015 Related to Tenure and Rotation of Accounting Firms and Public Accountants to Audit Quality

Analysis of the Implementation of Indonesian Government Regulation Number 20 Year 2015 Related to Tenure and Rotation of Accounting Firms and Public Accountants to Audit Quality

Audit firm tenure, auditor familiarity, and trust: Effect on auditee whistleblowing reporting intentions

Comments of the Auditing Standards Committee of the Auditing Section of the American Accounting Association on PCAOB Concept Release on Audit Quality Indicators, No. 2015-005, July 1, 2015

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