Does Auditor Tenure Improve Audit Quality? Moderating Effects of Industry Specialization and Fee Dependence
By C. Lim, Hun-Tong Tan. 2009
189 citations recorded by the source corpus.
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.
Subfields: Accounting, Management Information Systems
View Paper: https://www.semanticscholar.org/paper/7d46e261fbfb07e7f93636709f1b6890c4726a3d
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In Management Information Systems
Citations in the corpus
- Auditor Independence and Audit Quality (2015, unknown): “The positive role of industry specialist is confirmed by Lim and Tan (2010).”
- Determinants of audit report lag: A meta-analysis (2018, unknown): “ARL is expected to increase when an audit firm audits a client for the first time, as auditors require more start‐up time to become familiar with records, operations, internal control, and prior working papers (Ashton, Willingham, & Elliott, 1987; Carcello & Nagy, 2004; Lim & Tan, 2010).”
- Audit tenure, auditor specialization and audit report lag (2014, background): “They believe that changing auditors may influence audit quality because the auditors lack adequate knowledge of their clients and the industry during the early years of audit engagements (Lim and Tan, 2010).”