Auditor Tenure and Audit Reporting Failures

Posted: 18 Sep 2001

See all articles by Marshall A. Geiger

Marshall A. Geiger

University of Richmond

Kannan Raghunandan

Florida International University (FIU) - School of Accounting


Recently, the SEC has called for research regarding the relationship between audit tenure and audit failures. In this study, we address this issue by examining prior audit reports for a sample of companies entering into bankruptcy during the period 1996-1998. We use a multivariate analysis to test for the association between the type of audit opinion issued on the financial statements immediately prior to bankruptcy and the length of auditor tenure.

Our results indicate that there were significantly more audit reporting failures in the earlier years of the auditor/client relationship than when auditors served these clients for longer tenures. The results do not support the arguments of those who propose mandatory auditor rotation and suggest that, contrary to the concerns expressed by the SEC, there is an inverse relationship between auditor tenure and audit reporting failures.

JEL Classification: M49, K22

Suggested Citation

Geiger, Marshall A. and Raghunandan, Kannan, Auditor Tenure and Audit Reporting Failures. Available at SSRN:

Marshall A. Geiger (Contact Author)

University of Richmond ( email )

28 Westhampton Way
Richmond, VA 23173
United States
804-287-1923 (Phone)

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)

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