Audit Quality And Specialist Tenure

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Audit Quality And Specialist Tenure

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Author : Jennifer J. Gaver
language : en
Publisher:
Release Date : 2019

Audit Quality And Specialist Tenure written by Jennifer J. Gaver and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.

We argue that the association between auditor industry specialization and audit quality depends on how long the auditor has been a specialist. We measure audit quality using absolute discretionary accruals, income-increasing discretionary accruals, and book-tax differences. Our results, based on a sample of Big 4 audit clients from 2003-2015, indicate that auditors who have only recently gained the specialist designation produce a level of audit quality that does not surpass that produced by non-specialist auditors, and is generally lower than the audit quality produced by seasoned specialists. We estimate that the seasoning process takes two to three years. In contrast to prior research that finds no effect of specialization after propensity score matching, we find that seasoned specialists generally produce higher quality audits than other auditors even after matching. This suggests that the audit quality effect associated with seasoned industry specialist auditors is not due to differences in client characteristics.

Does Auditor Tenure Improve Audit Quality Moderating Effects Of Industry Specialization And Fee Dependence

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Author : Chee Yeow Lim
language : en
Publisher:
Release Date : 2015

Does Auditor Tenure Improve Audit Quality Moderating Effects Of Industry Specialization And Fee Dependence written by Chee Yeow Lim and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.

We investigate whether the relation between auditor tenure and audit quality is conditional on auditor specialization and fee dependence. Although prior studies have investigated the relation between extended auditor-client tenure and audit quality, none has examined how this relation is jointly influenced by both auditor specialization and fee dependence. Our main analyses, using accrual quality as a measure of audit quality, show that firms audited by specialists (vs. non-specialists) have relatively higher audit quality with extended auditor tenure, and that this relation is negatively moderated by auditors' fee dependence on clients. These results are robust to sensitivity tests, and alternative proxies for audit quality such as the issuance of going concern opinions and the market's response to quarterly earnings surprises.

Audit Firm Tenure And Audit Quality

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Author : Li Zheng Brooks
language : en
Publisher:
Release Date : 2013

Audit Firm Tenure And Audit Quality written by Li Zheng Brooks and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.

We propose that audit quality is likely to increase in the earlier years due to a Learning Effect and in later years it decreases due to a Bonding Effect. Adopting a quadratic model, we find that the average turning point is between 12 to 16 years for a large sample of U.S. firms. With an average tenure of 9 years in our sample, these findings imply that mandatory auditor firm rotation may not be necessary. Further, we find that the turning point varies by auditor - it is longer for non-Big N auditors, non-specialist auditors, and auditors with high client importance, and the deterioration of audit quality exists in low litigation industries only, consistent with the Bonding Effect explanation. Moreover, we find the turning point gets longer in the post-SOX period. Our results have implications for the current debate on mandatory audit firm rotation.

Auditor Tenure Auditor Specialization And Information Asymmetry

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Author : Ali R. Almutairi
language : en
Publisher:
Release Date : 2009

Auditor Tenure Auditor Specialization And Information Asymmetry written by Ali R. Almutairi and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009 with categories.

This paper examines the association between bid-ask spread, a market based measure of information asymmetry, and auditor industry specialization and auditor tenure. Our results show that information asymmetry is negatively related to the employment of an industry specialist auditor and positively related to audit firm tenure. These results are consistent across measures of specialization based on market share, portfolio share, and a composite measure of specialization introduced by Neal and Riley (2004). However, further tests refine those conclusions, in that the positive association between tenure and information asymmetry differs between specialist and non-specialist auditors. Specifically, we find that bid-ask spread is increasing in tenure for clients of non-specialist regardless of which measure of specialization is used, while the relation between bid-ask spread and tenure is statistically significant for clients of specialists for only one of the three specialization measures. These findings are consistent with a market that perceives audit quality diminishing with tenure for non-specialist auditors; and a market that finds audit quality increasing with industry specialization.

Audit Firm Tenure And Audit Quality

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Author : Wei Quan
language : en
Publisher:
Release Date : 2007

Audit Firm Tenure And Audit Quality written by Wei Quan and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with Auditing categories.

The objective of this thesis is to examine whether the length of the auditor-client relationship (audit tenure) is associated with reduced auditor independence, particularly in terms of auditors permitting excessive earnings management by their clients.

Audit Partner Tenure

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Author : Roger Simnet
language : en
Publisher:
Release Date : 1998*

Audit Partner Tenure written by Roger Simnet and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1998* with categories.

Auditor Tenure And Audit Quality

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Author : Li Zheng Brooks
language : en
Publisher:
Release Date : 2011

Auditor Tenure And Audit Quality written by Li Zheng Brooks and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with categories.

Audit Quality And Overvalued Equity

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Author : Robert Houmes
language : en
Publisher:
Release Date : 2013

Audit Quality And Overvalued Equity written by Robert Houmes and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.

Purpose - Audit quality studies document that accruals decrease when the audit firm is large, or the audit firm is an industry specialist, or the audit-client tenure is long. The purpose of this paper is to posit that incentives related to highly-valued equity mitigate these results, as managers use income increasing accruals to augment earnings.Design/methodology/approach - To test this assertion, the authors regress discretionary accruals on: controls, a highly valued equity indicator variable equal to 1 if the client's lagged price-to-earnings ratio is in the highest P/E quintile, indicator variables equal to 1 for alternative measures of audit quality, and interaction terms between the highly valued equity indicator variable and audit quality indicator variables.Findings - Results of tests show positive and statistically significant coefficients for each of the highly-valued equity-audit quality interaction terms, suggesting that when a firm is highly valued the accruals' decreasing effect of high quality auditors is reduced.Originality/value - Beginning with Jensen's article regarding the agency costs of overvalued equity, a stream of research examining factors associated with highly priced firms has developed. The paper extends these findings, as well as the considerable body of audit quality studies, by examining the ability of a high quality auditor to attenuate this result.Keywords Auditing, Equity capital, Price earning ratio, Audit quality, Highly valued equity,Discretionary accruals.

Auditor Tenure And The Timeliness Of Misstatement Discovery

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Author : Zvi Singer
language : en
Publisher:
Release Date : 2017

Auditor Tenure And The Timeliness Of Misstatement Discovery written by Zvi Singer and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.

Using the timeliness of misstatement discovery as a proxy for audit quality, we examine the association between audit firm tenure and audit quality in a setting that alleviates the endogeneity problem endemic to this line of research. We find that longer audit firm tenure leads to less timely discovery and correction of misstatements, which is consistent with a negative effect of long auditor tenure on audit quality. In addition, using the non-voluntary auditor change following the demise of Arthur Andersen in 2002 as a natural experiment, we show that the misstatements of its former clients were discovered faster than those of comparable companies that retained their auditors throughout the misstatement. This finding speaks to the benefit of a fresh look by a new auditor. An extended analysis shows that longer auditor tenure also leads to misstatements of greater magnitudes, and that the Sarbanes-Oxley Act has mitigated, but not eliminated, the negative effect of long auditor tenure. Lastly, we show that the negative association between auditor tenure and timely discovery of misstatements is mainly present in the first ten years of an audit engagement. Our study has implications for regulators who continue to express concern regarding lengthy auditor-client engagement.

Audits Of Public Companies

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Author : United States. General Accounting Office
language : en
Publisher: Nova Publishers
Release Date : 2008

Audits Of Public Companies written by United States. General Accounting Office and has been published by Nova Publishers this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with Business & Economics categories.

This book examines (1) concentration in the market for public company audits, (2) the potential for smaller accounting firms' growth to ease market concentration, and (3) proposals that have been offered by others for easing concentration and the barriers facing smaller firms in expanding their market shares.