Audit Firm Tenure, Non-Audit Services, and Internal Assessments of Audit Quality

• 成果类型: Article
• 署名作者: Bell, Timothy B.; Causholli, Monika; Knechel, W. Robert
• 署名单位: State University System of Florida; University of North Florida; University of Kentucky; State University System of Florida; University of Florida
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/1475-679X.12078
• 发表日期: 2015
• 页码: 461-509
• 关键词: business risk; independent auditors; partner tenure; fees; earnings; LITIGATION; EFFICIENCY; accruals; management; decisions

摘要

We use data from internal assessments of audit quality in a Big 4 firm to investigate the impact of audit firm tenure and auditor-provided non-audit services (NAS) on audit quality. We find that first-year audits receive lower assessments of audit quality and that quality improves shortly thereafter and then declines as tenure becomes very long. Partitioning our sample between SEC registrants and private clients, we find that the decline in audit quality in the long tenure range is attributable to audits of private clients. For audits of SEC registrants, the probability of a high quality audit reaches its maximum with very long tenure. We also find that audit fees are discounted for first-year audits but auditor effort is higher than in subsequent years. We find no association, on average, between total NAS fees and audit quality in the full sample but observe that total NAS fees are positively associated with quality for SEC registrants and negatively associated with quality for privately held clients. Our findings are important for regulatory policies related to audit firm tenure and auditor-provided NAS.