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Does auditor tenure influence the reporting of conservative earnings?

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  • Jenkins, David S.
  • Velury, Uma

Abstract

In this study, we examine the relation between auditor tenure and the reporting of conservative earnings. Using several measures of conservatism, we document a positive association between the conservatism in reported earnings and the length of the auditor-client relationship. We further document an increase in conservatism between short and medium tenure that does not deteriorate over long tenure. Collectively, the results imply lower conservatism for short auditor tenure, which suggests that mandating auditor rotation may have an adverse affect on the conservatism in reported earnings.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Accounting and Public Policy.

Volume (Year): 27 (2008)
Issue (Month): 2 ()
Pages: 115-132

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Handle: RePEc:eee:jappol:v:27:y:2008:i:2:p:115-132

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Web page: http://www.elsevier.com/locate/jaccpubpol

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Cited by:
  1. Faten Hakim & Mohamed Ali Omri, 2010. "Quality of the external auditor, information asymmetry, and bid-ask spread: Case of the listed Tunisian firms," International Journal of Accounting and Information Management, Emerald Group Publishing, vol. 18(1), pages 5-18, February.
  2. Gabbioneta, Claudia & Greenwood, Royston & Mazzola, Pietro & Minoja, Mario, 2013. "The influence of the institutional context on corporate illegality," Accounting, Organizations and Society, Elsevier, vol. 38(6), pages 484-504.
  3. Mehmet Ünsal Memis & Emin Hüseyin Cetenak, 2012. "Earnings Management, Audit Quality and Legal Environment: An International Comparison," International Journal of Economics and Financial Issues, Econjournals, vol. 2(4), pages 460-469.
  4. Jeong-Bon Kim & Byron Song & Judy Tsui, 2013. "Auditor size, tenure, and bank loan pricing," Review of Quantitative Finance and Accounting, Springer, vol. 40(1), pages 75-99, January.
  5. Chi, Wuchun & Wang, Chenchin, 2010. "Accounting conservatism in a setting of Information Asymmetry between majority and minority shareholders," The International Journal of Accounting, Elsevier, vol. 45(4), pages 465-489, December.
  6. Jerry Sun & Guoping Liu, 2011. "The effect of analyst coverage on accounting conservatism," Managerial Finance, Emerald Group Publishing, vol. 37(1), pages 5-20, January.
  7. Anastasopoulos, Nikolaos P. & Anastasopoulos, Markos P., 2012. "The evolutionary dynamics of audit," European Journal of Operational Research, Elsevier, vol. 216(2), pages 469-476.
  8. Firth, Michael & Rui, Oliver M. & Wu, Xi, 2012. "How Do Various Forms of Auditor Rotation Affect Audit Quality? Evidence from China," The International Journal of Accounting, Elsevier, vol. 47(1), pages 109-138.
  9. Emilia Peni & Sami Vähämaa, 2010. "Female executives and earnings management," Managerial Finance, Emerald Group Publishing, vol. 36(7), pages 629-645, July.

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