Audit Report Lags after Voluntary and Involuntary Auditor Changes

33 Pages Posted: 11 Apr 2011 Last revised: 2 Apr 2014

See all articles by Paul Tanyi

Paul Tanyi

University of North Carolina (UNC) at Charlotte - Department of Accounting

Kannan Raghunandan

Florida International University (FIU) - School of Accounting

Abhijit Barua

Florida International University - School of Accounting

Date Written: December 1, 2010

Abstract

We find that the audit report lag is significantly higher for former Andersen clients (that did not follow their Andersen partner to the new audit firm) than for clients voluntarily changing auditors from another Big 5 predecessor for the fiscal year ended December 31, 2002 (the first year with the new auditor for ex-Andersen clients). The differences in audit reporting lags between the two groups are not significant for fiscal years ended December 31, 2000 (the last year before Andersen’s Enron related problems surfaced) or 2003 (the second year with the successor auditor). We also find that clients with voluntary (i.e., non-Andersen) auditor changes have only marginally higher audit reporting lags compared to clients without auditor changes. Our results, focusing on a cost component of involuntary auditor changes, thus provide relevant empirical evidence for debates surrounding mandatory auditor rotation. We also find that ex-Andersen clients that followed the Andersen partner to the new audit firm had shorter audit report lags than ex-Andersen clients that did not follow their Andersen partner. Our findings highlight the importance of individual relationships in the auditing process, and suggest new avenues for future research.

Keywords: Arthur Andersen, Audit Report Lag, Mandatory Auditor Rotation, Voluntary Auditor Change

Suggested Citation

Tanyi, Paul and Raghunandan, Kannan and Barua, Abhijit, Audit Report Lags after Voluntary and Involuntary Auditor Changes (December 1, 2010). Accounting Horizons, Vol. 24, No. 4, 2010, Available at SSRN: https://ssrn.com/abstract=1806345

Paul Tanyi (Contact Author)

University of North Carolina (UNC) at Charlotte - Department of Accounting ( email )

9201 University City Blvd
Charlotte, NC 28223
United States

Kannan Raghunandan

Florida International University (FIU) - School of Accounting ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States
305-348-2582 (Phone)

Abhijit Barua

Florida International University - School of Accounting ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States
305-3483404 (Phone)

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