IDEAS home Printed from https://ideas.repec.org/a/dug/actaec/y2017i1p187-196.html
   My bibliography  Save this article

Audit Firm Tenure and Audit Quality Implied by Discretionary Accruals and Modified Opinions: Evidence from Turkey

Author

Listed:
  • Ahmet Türel

    (Istanbul University)

  • Nihat Tas

    (Istanbul University)

  • Mustafa Genç

    (Recep Tayyip Erdogan University)

  • Burcu Özden

    (Istanbul University)

Abstract

Accounting scandals and bankruptcies across the world have raised concerns about the financial statement audit quality. Though, prior results documented mixed results, some argue that auditors become more familiar with the client and therefore independence is impaired when audit firm tenure gets longer. Consequently, some regulators set a limit on the number of years an audit firm may audit the same client. This study examines the association between audit firm tenure and audit quality in Turkey. We used three measures to proxy audit quality such as propensity to issue modified audit reports and discretionary accruals determined by two models. We found some evidence that audit quality does not increase with limited audit firm tenure. Given the additional costs associated with audit switch, it is concluded that there are minimal benefits of mandatory firm rotation. The results of this study will be useful for the regulators who are in charge to improve the audit quality.

Suggested Citation

  • Ahmet Türel & Nihat Tas & Mustafa Genç & Burcu Özden, 2017. "Audit Firm Tenure and Audit Quality Implied by Discretionary Accruals and Modified Opinions: Evidence from Turkey," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 13(1), pages 187-196, February.
    • Handle: RePEc:dug:actaec:y:2017:i:1:p:187-196
    as

    Download full text from publisher

    File URL: http://journals.univ-danubius.ro/index.php/oeconomica/article/view/3738/3855
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Xiaowen Tian, 2007. "Accounting for sources of FDI technology spillovers: evidence from China," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 38(1), pages 147-159, January.
    2. Robert J Rolfe & David A Ricks & Martha M Pointer & Mark McCarthy, 1993. "Determinants of FDI Incentive Preferences of MNEs," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 24(2), pages 335-355, June.
    3. Magnus Blomström & Ari Kokko & Mario Zejan, 2000. "Multinational Corporations and Spillovers," Palgrave Macmillan Books, in: Foreign Direct Investment, chapter 8, pages 101-133, Palgrave Macmillan.
    4. Amar K. J. R. Nayak, 2008. "Multinationals in India," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-22738-5.
    5. John H Dunning, 1998. "Location and the Multinational Enterprise: A Neglected Factor?," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 29(1), pages 45-66, March.
    6. Asiedu, Elizabeth, 2002. "On the Determinants of Foreign Direct Investment to Developing Countries: Is Africa Different?," World Development, Elsevier, vol. 30(1), pages 107-119, January.
    7. John H. Dunning & Sarianna M. Lundan, 2008. "Multinational Enterprises and the Global Economy, Second Edition," Books, Edward Elgar Publishing, number 3215.
    8. Dunning, John H, 1973. "The Determinants of International Production," Oxford Economic Papers, Oxford University Press, vol. 25(3), pages 289-336, November.
    9. Filip Abraham & Jozef Konings & Veerle Slootmaekers, 2010. "FDI spillovers in the Chinese manufacturing sector," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 18(1), pages 143-182, January.
    10. Kumar, Nagesh, 1995. "Industrialization, Liberalization and Two Way Flows of Foreign Direct Investment: The Case of India," UNU-INTECH Discussion Paper Series 1995-04, United Nations University - INTECH.
    11. International Monetary Fund, 2005. "India: Selected Issues," IMF Staff Country Reports 2005/087, International Monetary Fund.
    12. Blomstrom, Magnus & Kokko, Ari, 1998. "Multinational Corporations and Spillovers," Journal of Economic Surveys, Wiley Blackwell, vol. 12(3), pages 247-277, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ruth Odin & David Jerry Oziegbe, 2022. "Auditors’ Independence, Audit Tenureship, Firm Characteristics and Audit Quality: Evidence from Nigeria," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 25(84), pages 54-68, December,.
    2. Dafydd Mali & Hyoung‐joo Lim, 2018. "Conservative Reporting and the Incremental Effect of Mandatory Audit Firm Rotation Policy: A Comparative Analysis of Audit Partner Rotation vs Audit Firm Rotation in South Korea," Australian Accounting Review, CPA Australia, vol. 28(3), pages 446-463, September.
    3. Dilek Kaçmaz & Ahmet Türel, 2021. "Audit Quality and Rotation: Perception in Turkey," Istanbul Management Journal, Istanbul University Business School, vol. 0(91), pages 109-122, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jordaan,Jacob Arie & Douw,Willem & Qiang,Zhenwei, 2020. "Multinational Corporation Affiliates, Backward Linkages, and Productivity Spillovers in Developing and Emerging Economies : Evidence and Policy Making," Policy Research Working Paper Series 9364, The World Bank.
    2. Agarwal, Natasha & Milner, Chris & Riaño, Alejandro, 2014. "Credit constraints and spillovers from foreign firms in China," Journal of Banking & Finance, Elsevier, vol. 48(C), pages 261-275.
    3. Dimitratos, Pavlos & Liouka, Ioanna & Young, Stephen, 2009. "Regional location of multinational corporation subsidiaries and economic development contribution: Evidence from the UK," Journal of World Business, Elsevier, vol. 44(2), pages 180-191, April.
    4. Waldkirch, Andreas & Ofosu, Andra, 2010. "Foreign Presence, Spillovers, and Productivity: Evidence from Ghana," World Development, Elsevier, vol. 38(8), pages 1114-1126, August.
    5. Natasha Agarwal & Chris Milner & Alejandro Riaño, 2011. "Credit Constraints and FDI Spillovers in China," Discussion Papers 11/21, University of Nottingham, GEP.
    6. repec:lan:wpaper:3763 is not listed on IDEAS
    7. V N Balasubramanyam & V Mahambare, 2003. "Foreign direct investment in India," Working Papers 539987, Lancaster University Management School, Economics Department.
    8. Simona Iammarino, 2018. "FDI and regional development policy," Journal of International Business Policy, Palgrave Macmillan, vol. 1(3), pages 157-183, December.
    9. Ben Hamida, Lamia & Gugler, Philippe, 2009. "Are there demonstration-related spillovers from FDI?: Evidence from Switzerland," International Business Review, Elsevier, vol. 18(5), pages 494-508, October.
    10. Petr Pavlínek & Pavla Žížalová, 2016. "Linkages and spillovers in global production networks: firm-level analysis of the Czech automotive industry," Journal of Economic Geography, Oxford University Press, vol. 16(2), pages 331-363.
    11. repec:lan:wpaper:4048 is not listed on IDEAS
    12. Yoke-Tong Chew & Henry Wai-Chung Yeung, 2001. "The SME Advantage: Adding Local Touch to Foreign Transnational Corporations in Singapore," Regional Studies, Taylor & Francis Journals, vol. 35(5), pages 431-448.
    13. Nigel Driffield & James Love & Karl Taylor, 2008. "Productivity and Labour Demand Effects of Inward and Outward FDI on UK Industry," Working Papers 2008001, The University of Sheffield, Department of Economics, revised Jan 2008.
    14. Petr Pavlínek & Jan Ženka, 2016. "Value creation and value capture in the automotive industry: Empirical evidence from Czechia," Environment and Planning A, , vol. 48(5), pages 937-959, May.
    15. Bernhard Dachs, 2016. "Techno-Globalisierung als Motor des Aufholprozesses imösterreichischen Innovationssystem," EIIW Discussion paper disbei222, Universitätsbibliothek Wuppertal, University Library.
    16. Livanis, Grigorios & Lamin, Anna, 2016. "Knowledge, Proximity and R&D Exodus," Research Policy, Elsevier, vol. 45(1), pages 8-26.
    17. Liu, Xiaohui & Zou, Huan, 2008. "The impact of greenfield FDI and mergers and acquisitions on innovation in Chinese high-tech industries," Journal of World Business, Elsevier, vol. 43(3), pages 352-364, July.
    18. Neil Foster-McGregor, 2012. "Innovation and Technology Transfer across Countries," wiiw Research Reports 380, The Vienna Institute for International Economic Studies, wiiw.
    19. Paul J. J. Welfens & Fabian J. Baier, 2018. "BREXIT and Foreign Direct Investment: Key Issues and New Empirical Findings," IJFS, MDPI, vol. 6(2), pages 1-21, April.
    20. Bernhard Dachs & Bernd Ebersberger & Hans Lööf, 2008. "The innovative performance of foreign-owned enterprises in small open economies," The Journal of Technology Transfer, Springer, vol. 33(4), pages 393-406, August.
    21. Subal C. Kumbhakar & George Mavrotas, 2005. "Financial Sector Development and Productivity Growth," WIDER Working Paper Series RP2005-68, World Institute for Development Economic Research (UNU-WIDER).
    22. Ito, Banri & Yashiro, Naomitsu & Xu, Zhaoyuan & Chen, XiaoHong & Wakasugi, Ryuhei, 2012. "How do Chinese industries benefit from FDI spillovers?," China Economic Review, Elsevier, vol. 23(2), pages 342-356.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:dug:actaec:y:2017:i:1:p:187-196. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Daniela Robu (email available below). General contact details of provider: https://edirc.repec.org/data/fedanro.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.