Mandatory Audit Partner Rotations and Audit Quality in the United States

Kuang, Huan; Li, Huimin; Sherwood, Matthew; Whited, Robert Lowell

doi:10.2308/ajpt-18-152

Cited by 31 publications

(13 citation statements)

References 23 publications

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“…Acito et al (2019) use company response letters to better understand management's judgment in materiality decisions, Abbott et al (2020) use SEC comments on auditor opinions to identify quality control failures at the audit firm, and Hope et al (2017) use univariate comment letter data to rule out an alternative explanation for their main tests related to short selling and audit risk. Finally, Kuang et al (2020), Laurion et al (2017), and Lee et al (2019) use audit partner names copied on company response letters as a way of identifying audit partners prior to the audit participant disclosure required by the PCAOB in Form AP. Kuang et al (2020) also discuss related issues of using comment letters as an identification strategy for time‐series information on audit partners.…”

Section: Summary Of Prior Literature Following the Sec Filing Review ...mentioning

confidence: 99%

“…Finally, Kuang et al (2020), Laurion et al (2017), and Lee et al (2019) use audit partner names copied on company response letters as a way of identifying audit partners prior to the audit participant disclosure required by the PCAOB in Form AP. Kuang et al (2020) also discuss related issues of using comment letters as an identification strategy for time‐series information on audit partners.…”

Section: Summary Of Prior Literature Following the Sec Filing Review ...mentioning

confidence: 99%

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The SEC Filing Review Process: A Survey and Future Research Opportunities*

Cunningham

Leidner

2022

Contemporary Accting Res

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As part of its goal to monitor and enhance the quality of information available to investors, the SEC reviews companies' filings to ensure compliance with applicable financial reporting and disclosure requirements. Increased public interest and the substantial costs for both the SEC in reviewing and the companies in responding have led to a rapidly growing body of accounting literature that examines the filing review process. We survey and comment on 80 published and unpublished academic research papers in this literature and identify significant gaps that future research should address. We also summarize the institutional features of the filing review process, aiming to inform future academic studies. Our survey should be of interest to both academics and market participants evaluating the effectiveness and efficiency of the filing review process.

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Section: Summary Of Prior Literature Following the Sec Filing Review ...mentioning

confidence: 99%

Section: Summary Of Prior Literature Following the Sec Filing Review ...mentioning

confidence: 99%

The SEC Filing Review Process: A Survey and Future Research Opportunities*

Cunningham

Leidner

2022

Contemporary Accting Res

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“…But major accounting scandals like Enron, WorldCom, etc., in the United States and Satyam in India, had raised questions about auditor independence. There was an increasing argument in the post-Enron era in the US and around the world that audit firms, as well as audit partners, tend to work for long periods with clients, and they tend to compromise their auditor independence (Kuang et al, 2020;Lennox & Wu, 2018). As a response, regulators have placed restrictions like a "cooling-off period" for former auditors from landing jobs at their clients, restrictions on non-audit services provided by the audit firm, and requiring audit partners/firms to rotate as mechanisms to enhance auditor independence and audit quality.…”

Section: Introductionmentioning

confidence: 99%

Audit partner rotation, and its impact on audit quality: Evidence from India

Mohapatra

Dayanandan

Kuntluru

et al. 2021

Cogent Economics & Finance

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Using multiple indicators of audit quality, the study examines the impact of audit partner rotation on audit quality in India based on 1,694 firm years for the period of 2011-2017 when the institutional set up for audit partner rotation was voluntary. The empirical results indicate that the audit partner rotation had no significant impact on audit quality as measured by discretionary accruals and going concern audit opinion. The study finds that other factors like loss year, size of the firm, value, leverage have a statistically significant impact on audit quality. The empirical results also indicate an inverse relationship between audit fees and audit partner rotation implying, price-cutting of the audit. The findings are important to regulators regarding the significance of audit partner rotation in enhancing audit quality.

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“…Existen trabajos que tratan sobre los socios de auditoría desde distintos enfoques. El tema más recurrente es el de la rotación de los socios firmantes y su relación con la calidad de auditoría (Kuang et al, 2020;MohammadRezaei et al, 2021;Chang et al, 2019;Krishnan & Zhang, 2019;Gómez-Aguilar et al, 2018). Otros temas destacables son el de la relación entre el género de los socios y la calidad de auditoría (Soepriyanto et al, 2020;Lee et al, 2019); el efecto de la carga de trabajo en el comportamiento de los socios (Chen et al, 2020); la experiencia del socio firmante y la calidad de auditoría (Sonu et al, 2019) y más concretamente sobre la experiencia en un sector específico (Garcia-Blandon et al, 2020).…”

Section: Número De Socios Firmantesunclassified

El origen de ingresos del auditor y calidad de la auditoría: el caso español

et al. 2022

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Previous studies point out the existence of a relationship between auditor’s specialization and audit quality. Beginning with this idea, the more important the auditing activity is over the audit firm’s business and the greater specialization in such activity, the more conservative the signing auditor will be in the issuance of the audit report. Using the quantitative materiality as audit quality proxy, we examine the effect of consultancy services’ fees and the signing audit partners’ relevance on materiality values. From the hand-collected real amounts of quantitative materiality informed by 995 Spanish non-listed client-year sample, we conclude that more effort on consultancy services lead auditors to apply higher materiality numbers. Our results also show that audit firms employ higher materiality estimations when the signing audit partners gain importance within the audit firm, supporting the idea of a risky shift. Our findings are consistent with the mainstream that affirms there are other factors, beyond quantitative ones, that influence the determination of materiality amounts. This study contributes to the existing research by using archival data that mirrors auditors’ quantitative materiality judgements and its implication for financial reporting. Estudios previos señalan la existencia de una relación entre la especialización del auditor y la calidad de la auditoría. A partir de esta idea, cuanto más importante sea la actividad de auditoría en el total del negocio de la firma auditora y mayor especialización exista en dicha actividad, el auditor firmante adoptará una postura más conservadora en la emisión de su informe. Utilizando la materialidad cuantitativa como subrogado de la calidad, se examina el efecto que los honorarios por otros servicios distintos a los de auditoría y el peso de los socios firmantes en la firma tienen sobre la cifra de materialidad. Partiendo de la materialidad real utilizada en cada uno de los encargos como medida de calidad de la auditoría y a través de una muestra de 995 clientes-año de compañías españolas no cotizadas, se concluye que una mayor dedicación a trabajos distintos a los de auditoría lleva al auditor a aplicar unas cifras de materialidad más altas. Los resultados también muestran que las firmas de auditoría usan materialidades más altas cuando los socios firmantes de la firma de auditoría ganan representación, reforzando la idea de un risky shift. Los hallazgos de este estudio son consistentes con la corriente de estudios que afirma que existen otros factores además de los cuantitativos que afectan a la fijación de la cifra de materialidad. Este trabajo contribuye a esta corriente mediante datos de archivo que reflejan el comportamiento del auditor durante la determinación de la cifra de materialidad cuantitativa y sus implicaciones en la divulgación de información financiera.

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Mandatory Audit Partner Rotations and Audit Quality in the United States

Cited by 31 publications

References 23 publications

The SEC Filing Review Process: A Survey and Future Research Opportunities*

The SEC Filing Review Process: A Survey and Future Research Opportunities*

Audit partner rotation, and its impact on audit quality: Evidence from India

El origen de ingresos del auditor y calidad de la auditoría: el caso español

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