2020-05-28T12:38:09Z

2020-05-28

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Audit tenure

The association between Audit Tenure & Earnings Quality. Evidence from S&P 500 Index.

g.tsiggouras@ihu.edu.gr

free

School of Economics, Business Administration and Legal Studies, MSc in International Accounting, Auditing and Financial Management

The issue of unless the quality of financial reporting is stricken by the duration of time that an auditor oblige a client has greeted long drawn attention from researches around the globe. These studies focused on public firms from different markets such as the Europe and US. These studies have had composited results, the plural of them seem to confute the assertion that a elongate auditor client connection negatively influence financial reporting and audit quality. We focus on firms from S&P 500, this business environment is an interesting case because all the private firms compose the plurality of the American economy, business environment that all the private firms encounter with size criteria a statutory regulations. We measure Audit Tenure by the years of professional collaboration between the accounting firm and client (indicator of five years), with the discretionary accruals we measure Earnings Quality and the agency costs related to them being measured with Q-Tobin Formula and Free Cash Flow formula with an ultimate goal to prove manipulated results.. The Earnings quality is measured with discretionary accruals, so them became our accepted proxy for managerial discretion. We use a sample of 392-audit reports from US companies and we conclude that the increasing audit tenure is associate with growth rates of earnings quality thought discretionary but we failed to connect them with manipulation results . Our thesis encountered with limitations, that’s it the connection of audit tenure and earnings quality with the tenure of the partner and also we met limitations of confidential information’s and information asymmetries about several agency costs.

Leventis, Stergios

Grose, Christos

ihu