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    Audit Report Lags after Voluntary and Involuntary Auditor...
    research summary posted June 22, 2013 by Jennifer M Mueller-Phillips, tagged 04.0 Independence and Ethics, 04.07 Audit Firm Rotation, 05.0 Audit Team Composition, 05.03 Partner Rotation 
    Audit Report Lags after Voluntary and Involuntary Auditor Changes
    Practical Implications:

    Regulators have long debated mandating auditor rotation. This study quantifies some of the costs of auditor rotation, specifically its impact on audit report lag. The findings lend support to opponents of mandatory rotation, since the first year after rotation requires more audit effort. The study also highlights one benefit that partner-firm familiarity can have (in decreasing audit report lag).


    Tanyi P., K. Raghunandan, and A. Barua. 2010. Audit Report Lags after Voluntary and Involuntary Auditor Changes. Accounting Horizons 24 (4): 671-688.

    Auditor tenure; auditor rotation; audit partner rotation
    Purpose of the Study:

    Because of recent debate about the costs of auditor rotation, the authors examine how mandatory and voluntary auditor rotation affects audit report lag, or the number of days between the fiscal year end and the audit report date.Prior research examines only voluntary auditor rotation, which might have different effects than the mandatory rotation advocated by regulators.

    Design/Method/ Approach:

    Authors use the demise of Arthur Andersen and firms’ subsequent auditor changes as a setting in which to learn about mandatory auditor rotation.

    Authors compare audit report lags for firms with fiscal yearend of December 31, 2002. Audit report lag is the only publicly observable, quantifiable measure of auditor effort.

    Andersen firms switch from Andersen to another audit firm in fiscal 2002, and control firms (voluntary rotation) switch from a Big5 audit firm in fiscal 2002.

    Authors also examine audit report lags in fiscal 2000.

    Authors also partition Andersen firms into firms that follow their Andersen partner into a new audit firm and those that do not.


    Andersen firms that do not follow their partners into a new audit firm have longer audit report lags than clients of other Big 5 auditors who switched to a new auditor in 2002. The audit report lag increases by 6.5 days (from 58.02 days to 62.57 days).

    Andersen firms that follow their audit partners into a new audit firm have shorter audit report lags (by 4.56 days or 7.8 percent) than Andersen firms that did not follow their audit partners.

    Compared with firms that do not change audit clients, firms with voluntary auditor changes experience only marginally longer audit report lags. Firms with mandatory auditor changes have significantly longer audit report lags.


    For more information on this study, please contact K. Raghunandan.

    Independence & Ethics, Audit Team Composition
    Audit Partner Rotation, Audit Firm Rotation

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