Auditor Independence: Does Audit Engagement Lead Partner Rotation Matter?

Following the Enron financial scandal, several mechanisms were introduced, including audit rotation, to improve audit independence and financial reporting quality. Audit rotation is based on two perspectives: audit firm and partner rotation. Most countries have adopted one of the two audit rotations to improve audit quality. However, few countries have adopted both audit mechanisms, including Nigeria. In Nigeria, several studies subsisted on audit firm rotation, neglecting the audit partner rotation, even though humans may be responsible for the impairment of audit quality rather than the firm. Our study filled the gap by examining the effect of audit partner tenure on financial reporting quality to determine whether audit partner rotation matters. In answering the study’s objective, data was collected from the financial report of Nigerian Deposit Money Banks using a census study and estimated using the Ordinary Least Square (OLS). The result showed that auditors’ independence is compromised with an elongated audit tenure and invariably results in a lower audit quality. The study aligned with the fresh eye hypothesis and supported the mandatory audit partner regulation to minimise the familiarity threat from a close auditor–client association arising from a long audit partner’s tenure.