Article2014

Audit tenure, auditor specialization and audit report lag

166 citations0/0 files storedManagerial Auditing Journal

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Auditing, Earnings Management, Governance Corporate Finance and Governance Corporate Governance and Financial Management

Abstract

Purpose – This paper aims to examine the association between audit firm tenure and audit report lag (ARL) and the impact of auditor industry specialization on the association between audit firm tenure and ARL. Design/Methodology/Approach – Using Habib and Bhuiyan’s (2011) method of measuring auditor industry specialization, the authors examine the sample of 7,291 firm-year observations from 2008 to 2010. Findings – The authors find that auditor industry specialization (regardless of city-level, national-level and joint city- and national-level industry specialization) weakens the positive association between ARL and short audit firm tenure, suggesting that auditor industry specialization complements the negative effect of short audit firm tenure on ARL. Originality/value – First, the authors add to the literature by answering the question of whether hiring industry auditor specialists is an effective way to shorten ARL created by short audit tenure. The authors provide some evidence that the concern of short audit tenure leading to longer ARL is reduced by hiring an industry-specialized auditor. Prior research mainly focuses on identifying the determinants of ARL without going further to find out which are the effective ways to reduce the audit delay. Second, their findings can somehow resolve the debate on whether audit firm rotation should be mandatory. A new auditor’s lack of knowledge of clients’ business operations during the early years of audit engagements results in longer ARL, which eventually influences the clients’ financial performance. The authors' result suggests the firms can reduce this adverse consequence by hiring an industry-specialized auditor. Finally, their findings may provide helpful information to firms in selecting external auditors, public accounting firms in selecting a differentiation strategy and regulators in mandating audit firm rotation.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 166 citations exist upstream.

References

1984Methodological Issues Related to the Estimation of Financial Distress Prediction Models 2003Do Nonaudit Services Compromise Auditor Independence? Further Evidence 2003Auditor Industry Specialization and Earnings Quality 2009National and Office‐Specific Measures of Auditor Industry Expertise and Effects on Audit Quality 2004Audit Firm Tenure and Fraudulent Financial Reporting 1984Timeliness of Reporting and the Stock Price Reaction to Earnings Announcements 2009Earnings quality: Some evidence on the role of auditor tenure and auditors’ industry expertise 2004Self-Selection of Auditors and Audit Pricing in Private Firms

Cited by

2016An International Perspective on Audit Report Lag: A Synthesis of the Literature and Opportunities for Future Research 2018An empirical examination of the determinants of audit report delay in France 2019Audit fees, perceived audit risk, and the financial crisis of 2008 2019Audit Committee Characteristics and Audit Report Lag: Evidence From Oman 2021How Has the Change in the Way Auditors Determine the Audit Report Date Changed the Meaning of the Audit Report Date? Implications for Academic Research

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.