U.S. Audit Partner Rotations
60 Pages Posted: 28 Oct 2014 Last revised: 29 Jan 2019
Date Written: June 15, 2016
We investigate the effects of audit partner rotation among U.S. publicly listed firms, utilizing the fact that audit partners are periodically copied by name in public correspondence between issuers and the SEC. Relative to non-rotation firms, we find no evidence of a change in the frequency of misstatements following the partner rotation; however, there is an increase in the frequency of restatement discoveries and announcements. We also find an increase in deferred tax valuation allowances. Overall, the results provide some evidence suggesting that U.S. partner rotations support a fresh look at the audit engagement.
Keywords: U.S. audit partner rotations; fresh look; restatements; valuation allowances and reserves; write-downs; special items.
JEL Classification: M41, M42, M48
Suggested Citation: Suggested Citation