The effect of audit partner tenure on client managers' accounting discretion

Neil Fargher, Ho Young Lee, Vivek Mande

Research output: Contribution to journalReview article

36 Citations (Scopus)

Abstract

Purpose - This paper aims to examine the effect of audit partner tenure (PARTEN) on client managers' accounting discretion. Design/methodology/approach - The authors contend that, when a new audit partner is from the same audit firm as the outgoing audit partner (audit partner rotation), audit quality increases because the new audit partner brings "fresh eyes" to the engagement. Findings - The results confirm this conjecture. The authors find that, in the initial years of tenure of a new audit partner, client managers' accounting discretion decreases when the new partner is from the same audit firm as the outgoing partner. However, when the new audit partner is from a different audit firm as the outgoing partner (audit firm rotation), it is found that client managers' accounting discretion increases in those initial years. Originality/value - The results provide support for recent legislation in the US restricting audit PARTEN and should be of interest to other regulatory bodies contemplating mandatory audit partner rotation.

Original languageEnglish
Pages (from-to)161-186
Number of pages26
JournalManagerial Auditing Journal
Volume23
Issue number2
DOIs
Publication statusPublished - 2008 Jan 22

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Tenure
Accounting discretion
Audit
Managers
Audit firms
Design methodology
Legislation
Audit quality

All Science Journal Classification (ASJC) codes

  • Accounting
  • Business, Management and Accounting(all)
  • Economics, Econometrics and Finance(all)

Cite this

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The effect of audit partner tenure on client managers' accounting discretion. / Fargher, Neil; Lee, Ho Young; Mande, Vivek.

In: Managerial Auditing Journal, Vol. 23, No. 2, 22.01.2008, p. 161-186.

Research output: Contribution to journalReview article

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