Do Government-Experienced Auditors Reduce Audit Quality?

Abstract

This paper examines the effect of auditors with government experience on audit quality using 1,067 firm*year observations between 2008 and 2015 from Borsa İstanbul firms. We use three measures of audit quality to test the effect of auditors with government experience. Government-experienced auditors are handled under two different headings. First, whether auditors have government experience or not. Second, how many years did they serve in a government agency? Our main and Heckman estimation results indicate that auditors with government experience provide low qualified audit work in terms of audit report aggressiveness, audit report lag and discretionary accruals. Spending more years in a government agency leads to low qualified audit services in terms of audit report aggressiveness, audit report lag and discretionary accruals. Additionally, the results of the selection model indicate that family firms and domestic firms are more likely to work with government-experienced auditors.

Keywords: Government-Experienced Auditors, Overall Experience, Audit Quality, Aggressiveness, Reporting Lag, Discretionary Accruals, Auditor Characteristics, Turkey, Borsa İstanbul

JEL Classification: M40, M41, M42, M49