Does shared tenure between audit committee chair and engagement partner affect audit outcomes? Evidence from the UK |
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| Institution: | 1. Manning School of Business, University of Massachusetts Lowell, 72 University Ave, Lowell, MA, 01854, USA;2. Lally School of Management, Rensselaer Polytechnic Institute, USA;3. School of Accounting and Finance, Hong Kong Polytechnic University, Hong Kong;4. Kogod School of Business, American University, USA;1. University of South Australia Business, University of South Australia, GPO Box 2471, Adelaide, SA, 5001, Australia;2. Fenner School of Environment and Society, College of Science, The Australian National University, Canberra, ACT, 2601, Australia;1. Ecole Supérieure des Sciences Commerciales D''Angers (ESSCA), Lyon, France;2. International School, Vietnam National University, Hanoi, Vietnam;3. Department of Accounting and Corporate Governance, Macquarie Business School, Macquarie University, Sydney, Australia;4. Department of Accounting, Faculty of Economics & Business, University of Groningen, the Netherlands |
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| Abstract: | Social psychology literature suggests that shared working experience between individuals affects the way in which they communicate, interact and exchange information. Given that the relationship between audit committee (AC) and engagement partner (EP) involves extensive interactions and information sharing with the aim to protect the integrity of financial statements, this study examines whether the co-tenure relationship between the person who leads the AC (audit committee chair (ACC)) and EP affects audit outcomes. Using 234 UK non-financial companies, we find that longer co-tenure between ACC and EP improves accruals quality and reduces the propensity to meet or beat the earnings benchmark. Moreover, we do not find a significant relationship between ACC–EP shared tenure and audit fees, alleviating the concern that ACC–EP shared tenure could lead to collusion or inappropriate favoritism towards the EP regarding audit fees. Our findings offer a valuable contribution to the literature, practice, and regulators. |
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| Keywords: | Shared tenure Audit committee chair Engagement partner Audit quality Audit fees |
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