Earnings Quality: Some Evidence on the Role of Auditor Tenure and Auditors' Industry Expertise

57 Pages Posted: 5 Mar 2009

See all articles by Ferdinand A. Gul

Ferdinand A. Gul

Monash University Sunway Campus

Simon Fung

Deakin University

Bikki Jaggi

Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick

Date Written: March 5, 2009

Abstract

Prior studies suggest that auditors with short tenure are associated with lower earnings quality because of the lack of client-specific knowledge and/or low balling. In this study, we examine whether industry specialization of auditors and low balling affect the association between auditor tenure and earnings quality. We find that the association between shorter auditor tenure and lower earnings quality is weaker for firms audited by industry specialists compared to non-specialists. In addition, we do not find results consistent with the low balling explanation.

Keywords: auditor tenure, auditor industry specialization, low balling, earnings quality

JEL Classification: M43, M49

Suggested Citation

Gul, Ferdinand A. and Fung, Simon and Jaggi, Bikki, Earnings Quality: Some Evidence on the Role of Auditor Tenure and Auditors' Industry Expertise (March 5, 2009). Journal of Accounting & Economics (JAE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=1353866

Ferdinand A. Gul (Contact Author)

Monash University Sunway Campus ( email )

Jalan Lagoon Selatan
Selangor Darul Ehsan
Bandar Sunway, 46150
Malaysia

Simon Fung

Deakin University ( email )

221 Burwood Highway
Burwood, Victoria
Australia

Bikki Jaggi

Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick ( email )

100B Rockafeller Road
Piscataway, NJ 08854
United States

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