Audit Partner Tenure, Audit Firm Tenure, and Discretionary Accruals: Does Long Auditor Tenure Impair Earnings Quality?*

Chen, Chih Ying; Lin, Chan Jane; Lin, Yu Chen

doi:10.1506/car.25.2.5

Cited by 444 publications

(354 citation statements)

References 30 publications

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“…On the other hand, opponents of mandatory audit firm rotation, advocates of the audit expertise hypothesise state that a number of studies report that audit failures occur more often in the initial stage of an audit service (Peirre & Anderson, 1984; American Institute of Certified Public Accountants [AICPA], 1992;Arrunada & Paz-Ares, 1997;Johnstone & Bedard, 2004;Carcello & Nagy, 2004, Chen et al, 2008. Johnson et al (2002) examine the relation between audit firm tenure and absolute abnormal accruals.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Previous studies often use earnings response coefficients (Ghosh & Moon, 2005). The large majority of studies use signed and absolute abnormal accruals as proxies for audit quality (Heninger, 2001;Johnson et al, 2002;Richardson, Tuna, & Wu, 2002;Myers et al, 2003;Chi & Huang, 2005;Piot & Janin, 2007;Chen et al, 2008;Chi et al, 2009). Chi and Huang (2005) examine the effect of audit firm and audit partner tenures, using signed abnormal accruals as a proxy for audit quality.…”

Section: Abnormal Accrual Modelmentioning

confidence: 99%

“…First, we use two measures of abnormal accruals as proxies for audit quality; the modified Jones model suggested by Dechow, Sloan and Sweeney (1995) and the performanceadjusted Jones model suggested by Kothari, Leone and Wasley (2005). Abnormal accruals are widely used in accounting literature as proxies for earnings and/or audit quality (Healy & Wahlen, 1999;Kothari, 2001;Myers et al, 2003;Chen, Lin, & Lin, 2008;Chi et al, 2009). We find evidence that the audit quality of the mandatory audit firm rotation sample is lower or indifferent, compared to the samples in the same sample period (2006)(2007)(2008)(2009).…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Mandatory Audit Firm Rotation and Big4 Effect on Audit Quality: Evidence from South Korea

Choi¹,

Lim²,

Mali³

2017

AAMJAF

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Section: Literature Reviewmentioning

confidence: 99%

Section: Abnormal Accrual Modelmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Mandatory Audit Firm Rotation and Big4 Effect on Audit Quality: Evidence from South Korea

Choi¹,

Lim²,

Mali³

2017

AAMJAF

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“…The previous studies conclude that rotation would have negative [10,11,13] positive [21,22], or mixed or no effects [10,23] on audit quality. This study concentrates on the negative effects of mandatory audit-firm rotation on the audit quality; there are several arguments against mandatory audit firm rotation:…”

mentioning

confidence: 97%

Auditor’s Professional Specialization Role in Reducing the Potential Negative Effects of Mandatory Audit-Firm Rotation on Audit Quality

Elshawarby¹

2017

J Account Mark

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This study aims at investigating the effect of professional specialization on audit quality. It examines the relation between professional specialization and the potential negative effects of MAFR on audit quality. Actually, the questionnaire was distributed among auditors and professor of accounting in Egypt confirmed hypothesis: there are statistically significant differences among the categories of inquisitors, the impact of the professional specialization of auditors on audit client choices when the audit client apply the mandatory rotation policy and there is a significant relation between auditor professional specialization and mandatory audit-firm rotation. There is a significant association between auditor professional specialization and reducing the potential adverse effects of mandatory audit-firm rotation. The study has reached auditor rotation can lead to improved audit quality, but when the incoming auditor is the auditor's professional specialization have significant impact on the potential negative effects of mandatory audit-firm rotation on audit quality.

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“…The subject has extensively been addressed in different contexts by researchers around the globe (e.g. Chen et al, 2008;Jenkins and Velury, 2008;Kaplan and Mauldin, 2008) (Note 1). Interestingly, most of the research seems to have provided results in disfavour of mandatory auditor rotation.…”

mentioning

confidence: 99%

Audit Firm Rotation, Audit Firm Tenure and Earnings Conservatism

Kramer¹,

Γεωργακόπουλος²,

Sotiropoulos³

et al. 2011

IJBM

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This study aims to contribute to the debate around the possibility of mandating audit firm rotation. Specifically, it examines conservatism as an attribute of earnings quality, which has not attracted particular attention in the auditor rotation research. Applying regression analyses on a sample, which consists of U.S. firms for the period 1980-2006, our findings indicate that conservatism in reported earnings increases after the rotation of the audit firm. However, our results lack significance. Moreover, our results indicate that conservatism in reported earnings decreases as the tenure of the audit firm lengthens. Consequently, mandating audit firm rotation might have a positive impact on conservatism and thus on the quality of reported earnings. However, additional analysis shows that this impact might not have existed in the later part of the sample period.

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Audit Partner Tenure, Audit Firm Tenure, and Discretionary Accruals: Does Long Auditor Tenure Impair Earnings Quality?*

Cited by 444 publications

References 30 publications

Mandatory Audit Firm Rotation and Big4 Effect on Audit Quality: Evidence from South Korea

Mandatory Audit Firm Rotation and Big4 Effect on Audit Quality: Evidence from South Korea

Auditor’s Professional Specialization Role in Reducing the Potential Negative Effects of Mandatory Audit-Firm Rotation on Audit Quality

Audit Firm Rotation, Audit Firm Tenure and Earnings Conservatism

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