Do client-specific knowledge and client/firm power mediate the relationship between auditor tenure and audit effort in Big 4 accounting firms?

摘要

This study investigates external auditors' perceptions of the relationship between auditor tenure and audit effort and the implications of this relationship for audit quality. Auditor tenure is usually defined in the accounting literature as the length of outside auditor's engagement with a client. Previous studies have examined the relationship between auditor tenure, audit quality, and the likelihood of material misstatements. My study contributes to this research by investigating the two factors---client/firm power and client-specific knowledge---that may affect the relationship between auditor tenure and audit effort. I proposed that these variables will mediate the relationships between auditor tenure and audit effort leading to the increased likelihood of material misstatements. The data was obtained from a survey of external auditors employed in the Big 4 accounting firms in the United States. Analysis of the data showed that longer auditor tenure may have a negative impact on audit effort. Specifically, my findings suggest that as auditor tenure increases auditor-client relationship could become more personal and less professional and that auditors could also be more strongly affected by growing client power at later stages of their engagement with the client. This study enhances our understanding of the association between auditor tenure and audit effort that may raise the likelihood of material misstatements and decrease of audit quality. These findings suggest the need for revisiting mandatory auditor rotation policy as a means of improving audit effort and overall audit quality.