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Exploring the Term of the Auditor-Client Relationship and the Quality of Earnings: A Case for Mandatory Auditor Rotation?
Abstract
In this study, we document evidence on the relation between auditor tenure and earnings quality using the dispersion and sign of both absolute Jones-model abnormal accruals and absolute current accruals as proxies for earnings quality. Our study is motivated by calls for “mandatory auditor rotation,” which are based on concerns that longer auditor tenure reduces earnings quality. Multivariate results, controlling for firm age, size, industry growth, cash flows, auditor type (Big N versus non-Big N), industry, and year, generally suggest higher earnings quality with longer auditor tenure. We interpret our results as suggesting that, in the current environment, longer auditor tenure, on average, results in auditors placing greater constraints on extreme management decisions in the reporting of financial performance.
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Citations
Cited by
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DeFond, M., & Zhang, J. (2014) · Journal of Accounting and Economics · doi:10.1016/j.jacceco.2014.09.002 · Cited by 3,188
Earnings management, surplus free cash flow, and external monitoring
Chung, R., Firth, M., & Kim, J.-B. (2005) · Journal of Business Research · doi:10.1016/j.jbusres.2003.12.002 · Cited by 386
Auditor Independence and Audit Quality: A Literature Review
Tepalagul, N., & Lin, L. (2015) · Journal of Accounting, Auditing & Finance · doi:10.1177/0148558x14544505 · Cited by 339
Corporate social responsibility assurance and reporting quality: Evidence from restatements
Ballou, B., Chen, P.-C., Grenier, J. H., & Heitger, D. L. (2018) · Journal of Accounting and Public Policy · doi:10.1016/j.jaccpubpol.2018.02.001 · Cited by 211
Metadata
- Authors
- Myers, J. N., Myers, L. A., & Omer, T. C.
- Venue
- The Accounting Review
- Publisher
- American Accounting Association
- Published
- 2003-07-01
- Volume
- 78
- Issue
- 3
- Pages
- 779-799
- ISSN
- 0001-4826 (ISSN-L)
- 1558-7967
- OpenAlex
- W2152596199
- Cited by
- 1,492
- References
- 0
- FWCI
- 88.28
- Type
- journal article
- Language
- en
- Open access
- closed
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- CoChat. (2026). Citation check: Exploring the Term of the Auditor-Client Relationship and the Quality of Earnings: A Case for Mandatory Auditor Rotation? https://app.cochat.ai/papers/10.2308/accr.2003.78.3.779
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- Myers, J. N., Myers, L. A., & Omer, T. C. (2003). Exploring the Term of the Auditor-Client Relationship and the Quality of Earnings: A Case for Mandatory Auditor Rotation? The Accounting Review. https://doi.org/10.2308/accr.2003.78.3.779
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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
