Does Audit Firm Tenure Matter to Audit Committee Members? Evidence from an Accounting Dispute

• Published in: Accounting horizons Vol. 33; no. 2; pp. 25 - 41
• Main Authors: Rummell, Janice E., DeZoort, F. Todd, Hermanson, Dana R.
• Format: Journal Article
• Language: English
• Published: Sarasota American Accounting Association 01.06.2019
• Subjects: Accounting firms; Audit committees; Auditing profession; Auditors; Audits; Between-subjects design; Big Four accounting firms; Credibility; Financial reporting; Perceptions; Reliability; Tenure; United States > US
• ISSN: 0888-7993; 1558-7975
• DOI: 10.2308/acch-52346

This study examines the effects of Big 4 audit firm tenure on audit committee member support for the auditor in an auditor/management dispute over a subjective accounting issue. One hundred eighteen U.S. public company audit committee members participated in an experiment with audit firm tenure (short/long) manipulated randomly between subjects. The results indicate that participants in the long audit firm tenure group provide more support for the auditor in the dispute than participants in the short tenure group. Audit committee support for the auditor is positively related to audit committee member experience and CPA status, as well as perceived management pressure to meet analyst expectations, but negatively related to perceived management experience in financial reporting. Finally, audit committee members' perceptions of audit firm reliability (i.e., credibility and dependability) mediate the audit firm tenure-auditor support relation. Overall, our results suggest enhanced audit committee support for longer-tenured auditors.