The Influence of Auditor Tenure on Audit Quality and Financial Statement Reliability in Public Firms

Posted: Jul 15, 2023

• Aiden Cooper
• Lila Morgan
• Grayson Holt

Abstract

The relationship between auditor tenure and audit quality represents one of the most enduring debates in accounting and corporate governance literature. Traditional perspectives have largely approached this relationship through dichotomous frameworks, positing either that longer tenure enhances audit quality through accumulated client-specific knowledge or diminishes it through compromised independence and professional skepticism. However, these conventional approaches fail to capture the complex, multi-dimensional nature of auditor-client relationships and their evolution over time. This research introduces a novel computational methodology that transcends traditional analytical limitations by modeling audit quality as a dynamic, non-linear function of tenure duration interacting with contextual factors. Our investigation addresses several critical gaps in existing literature. First, we move beyond simple tenure duration metrics to develop a comprehensive framework that incorporates auditor expertise development, relationship dynamics, and environmental contingencies. Second, we employ advanced machine learning techniques capable of detecting complex patterns and interactions that conventional statistical methods might overlook. Third, we examine how the tenure-quality relationship varies across different regulatory regimes, industry contexts, and firm characteristics, providing nuanced insights for policymakers and practitioners.