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The interaction effects of firm and partner tenure on audit quality

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  • Josep Garcia-Blandon
  • Josep Maria Argiles-Bosch

Abstract

This paper investigates the impact of firm and partner tenure on audit quality, where audit quality is proxied by discretionary accruals. We study a sample of Spanish listed companies between 2005 and 2011 and address both the individual and the interaction effects of firm and partner tenure. Our study is motivated by the current debate, particularly intense at the EU level, on the impact of the auditor rotation regime on the quality of auditing. We find that, without considering the interaction effects, firm and partner tenure do not seem to play a relevant role as determinants of audit quality. Importantly, the interaction of firm and partner tenure shows stronger effects on audit quality than both forms of tenure separately considered. Finally, our analysis suggests that audit quality is maximized when medium firm and partner tenures interact. However, results for the interaction variables are sensitive to the accruals estimation method.

Suggested Citation

  • Josep Garcia-Blandon & Josep Maria Argiles-Bosch, 2017. "The interaction effects of firm and partner tenure on audit quality," Accounting and Business Research, Taylor & Francis Journals, vol. 47(7), pages 810-830, November.
    • Handle: RePEc:taf:acctbr:v:47:y:2017:i:7:p:810-830
    DOI: 10.1080/00014788.2017.1289073
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    Cited by:

    1. Murat Ocak & Bekir Emre Kurtulmuş & Emrah Arıoğlu, 2024. "Do Individual Auditors from More Religious Hometowns Enhance Audit Quality? Evidence from an Islamic Country," Journal of Business Ethics, Springer, vol. 190(2), pages 439-481, March.
    2. Mohammad Abedalrahman Alhmood & Hasnah Shaari & Redhwan Al-dhamari, 2022. "Audit Partner Characteristics and Real Earnings Management Practices in Jordan," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 6, pages 185-200.
    3. Alhababsah, Salem & Alhaj-Ismail, Alaa, 2023. "Does shared tenure between audit committee chair and engagement partner affect audit outcomes? Evidence from the UK," The British Accounting Review, Elsevier, vol. 55(2).

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