TY - JOUR
T1 - Audit firm tenure and independence
T2 - A comprehensive investigation of audit qualifications in Spain
AU - Garcia-Blandon, Josep
AU - Argiles, Josep Ma
N1 - Publisher Copyright:
© 2015 Elsevier Inc.
PY - 2015/1/1
Y1 - 2015/1/1
N2 - The European Commission's Green Paper on Audit Policy has raised serious concerns about external auditor independence and also encouraged further research about the implications of long audit firm tenures. We examine the effects of audit firm tenure on independence, while measuring independence using the audit report opinion with a sample of Spanish public companies for the period 2002-2009. Generally, prior research has limited to the examination of modified going-concern opinions to financially distressed firms. This approach limits the generalization of results as well as the ability to address the traditional auditor role in the classical corporate governance scheme. To address these issues, we propose a multinomial approach which not only includes all types of audit qualifications in the analysis, but also considers the implications of going-concern opinions for the auditor-client relationship. Our results show that auditors seem willing to sacrifice independence in lengthy engagements, but only for non-going-concern modified opinions. This finding is robust to various proxies of accounting quality.
AB - The European Commission's Green Paper on Audit Policy has raised serious concerns about external auditor independence and also encouraged further research about the implications of long audit firm tenures. We examine the effects of audit firm tenure on independence, while measuring independence using the audit report opinion with a sample of Spanish public companies for the period 2002-2009. Generally, prior research has limited to the examination of modified going-concern opinions to financially distressed firms. This approach limits the generalization of results as well as the ability to address the traditional auditor role in the classical corporate governance scheme. To address these issues, we propose a multinomial approach which not only includes all types of audit qualifications in the analysis, but also considers the implications of going-concern opinions for the auditor-client relationship. Our results show that auditors seem willing to sacrifice independence in lengthy engagements, but only for non-going-concern modified opinions. This finding is robust to various proxies of accounting quality.
KW - Accounting quality
KW - Audit firm tenure
KW - Auditor independence
KW - Litigation risk
KW - Multinomial logistic model
UR - http://www.scopus.com/inward/record.url?scp=84925216791&partnerID=8YFLogxK
U2 - 10.1016/j.intaccaudtax.2015.02.001
DO - 10.1016/j.intaccaudtax.2015.02.001
M3 - Article
AN - SCOPUS:84925216791
SN - 1061-9518
VL - 24
SP - 82
EP - 93
JO - Journal of International Accounting, Auditing and Taxation
JF - Journal of International Accounting, Auditing and Taxation
ER -