Auditor-Client Tenure Analysis and Its Effect on Auditor Independence
Author:
Master Student George Silviu CORDOȘ, Assistant Melinda Timea FÜLÖP, Ph. D.
JEL:
M 42
DOI:
Keywords:
external audit, BSE, FTSE 100, audit quality, auditor rotation
Abstract:
This study examines how auditor-client tenure, or the length of the auditor-client relation, affects auditor independence. The main reason for this investigation is the importance of the audit mission and audit report. By reviewing the literature on this subject the authors have found a series of studies concerning auditor responsibilities and auditor rotation. In this article the authors present the results of a quantitative study which focuses on auditor rotation at listed companies. The results show that even though Romania is still an emergent market, Category 1 listed companies on Bucharest Stock Exchange (BVB) tend to choose a Big 4 auditor as their audit partner. Also, the authors consider that most suppositions from previous studies, which state that auditor change/rotation conveys marginal assurances regarding independence while bringing mostly negative effects in other areas, are confirmed in the present study as well.