audit partner tenure and audit quality

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1、THEACCOUNTINGREVIEWVol.81,No.32006pp.653676AuditPartnerTenureandAuditQualityPeterCareyMonashUniversityRogerSimnettTheUniversityofNewSouthWalesABSTRACT:Rotationofauditpartnersisoneofthemainpolicyinitiativesthathasbeenimplementedinmanyjurisdictionsaroundt

2、heworldtodealwithconcernsaboutauditquality.Thebasisofanyrequirementlimitingthetenureofauditpartnersisthatthereisareductioninauditqualityassociatedwithlongperiodsoftenure.UsingdatafromAustralia,wheretheauditpartnercanbeidentifiedandforaperiodwherepartnerr

3、otationwasnotmandatory,weexaminetheassociationbetweenauditqualityandlongauditpartnertenure.Thethreemeasuresofauditqualityexaminedaretheaudi-tor’spropensitytoissueagoing-concernauditopinionfordistressedcompanies,thedirectionandamountofabnormalworkingcapi

4、talaccruals,andjustbeating(missing)earningsbenchmarks.Forlongtenureobservationswefindalowerpropensitytoissueagoing-concernopinionandsomeevidenceofjustbeating(missing)earningsbench-marks,consistentwithdeteriorationinauditqualityassociatedwithlongauditpart

5、nertenure.Thereisnoevidenceofanassociationoflongaudittenurewithabnormalworkingcapitalaccruals.Keywords:auditpartnertenure;auditquality;qualifications;earningsmanagement.DataAvailability:Alldatahasbeenextractedfrompubliclyavailablesources.I.INTRODUCTIONpo

6、licyofmandatoryrotationofauditpartnersforaparticularauditclientissug-Agestedasameansofimprovingauditqualityandthereforeincreasingthequalityofgeneral-purposefinancialstatements.Thebenefitsnormallyespousedarethattheindependenceoftheengagementpartnerismainta

7、inedorthatanewperspectiveontheauditmayresultintheidentificationofissuesthathavebeenoverlookedonpreviousaudits.ThesebenefitsthereforerelyonthebeliefthatextendedauditpartnertenureisassociatedWeappreciatecommentsreceivedonearlierversionsofthispaperfrompartic

8、ipantsattheAccountingAssociationofAustraliaandNewZealandConference,BostonAreaResearchColloquium(BARC),UniversityofAlberta,UniversityofConnecticut,InternationalSymposiumonAuditResearchUniversityofMassachusetts(Amherst),Universityo