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Audit quality and equity liquidity: some evidence on the role of auditor tenure and auditors' industry specialisation in Tunisian context

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  • Faten Hakim
  • Mohamed Ali Omri
  • Ines Hakim

Abstract

Prior studies imply a positive relation between auditor specialisation and audit quality, but the effect of auditor tenure on audit quality is mixed. In this study, we examine whether industry specialisation of auditors affect the association between auditor tenure and equity liquidity. Lower audit quality indicates lower accounting information quality, which may lead to a larger proportion of informed traders dealing in the equity of the firm, along with a corresponding decline in the willingness of uninformed liquidity traders to trade in such equities. We also find that the liquidity is positively related to the employment of an industry specialist auditor and negatively related to audit firm tenure. In addition, we find that the association between shorter auditor tenure and lower liquidity is weaker for firms audited by industry specialists compared to non-specialists.

Suggested Citation

  • Faten Hakim & Mohamed Ali Omri & Ines Hakim, 2010. "Audit quality and equity liquidity: some evidence on the role of auditor tenure and auditors' industry specialisation in Tunisian context," International Journal of Business Continuity and Risk Management, Inderscience Enterprises Ltd, vol. 1(2), pages 151-165.
    • Handle: RePEc:ids:ijbcrm:v:1:y:2010:i:2:p:151-165
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