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The effect of audit firm tenure and audit firm switching on auditor reporting quality: The case of going concern opinion

Shafie, Rohami and Md Yusof, Mohd 'Atef and Md Hussain, Md Hairi (2004) The effect of audit firm tenure and audit firm switching on auditor reporting quality: The case of going concern opinion. In: International Conference on Corporate Governance & Reporting, 25-26 May 2004, Quality Hotel, Kuala Lumpur.

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The issue of audit tenure has been discussed since four decades age. Nowadays, due to the recent corporate scandals in the United States, the issue is discussed together with auditor independence that led to companies’ demise. Mandatory audit rotation debates come from the arguments that long audit tenure would create cosy relationship between auditors and clients and thus would lead to audit reporting failure such as in the case of bankruptcy. Therefore, this study attempts to investigate the situation in Malaysia whereby no empirical study using archival data has been done Specifically, the current study examines the impact of audit tenure on the issuance of going concern opinion. The result shows that audit firm tenure is positively significant in determining going concern opinion. Our findings also pointed that if a client never changed its auditor since listing, there is a tendency to issue a clean opinion though the client suffers apparent financial problems. Therefore, it can be said that, “auditor change would do well, but forcing an unrealistic auditor rotation might not yield what it hopes for”. For the benefit of auditing profession, we echo the importance of self-regulation and Laissez-faire practice in Malaysia as a better alternative than a mandatory auditor rotation. Further sensitivity analyses show that the results are robust to different measurements.

Item Type: Conference or Workshop Item (Paper)
Additional Information: SO Code: 10974
Uncontrolled Keywords: Audit firm tenure, audit firm switching, auditor reporting quality, going concern opinion, mandatory auditor rotation
Subjects: H Social Sciences > HF Commerce > HF5601 Accounting
Divisions: College of Business
Depositing User: Mr. Md Hairi Md Hussain
Date Deposited: 11 Mar 2014 00:59
Last Modified: 17 Mar 2014 08:11
URI: http://repo.uum.edu.my/id/eprint/10433

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