The Effect of Previous Working Relationship between Rotating Partners on Mandatory Audit Partner Rotation

Min Zhang, Haoran Xu and Xu Li

The International Journal of Accounting, 2017, vol. 52, issue 2, 101-121

Abstract: This study adds to the literature on mandatory rotation of audit partners in Chinese companies by examining the effect of the pre-rotation relationships between incoming and outgoing partners. We consider the rotating partners to have prior working relationship if they were cosigners of audit reports before the rotation. We find two different outcomes of having prior working relationship: (a) increasing the likelihood that outgoing partners rotate back after the cooling off period, and (b) lower audit quality improvement after rotation. These findings bring into question the extent to which rotating partners with prior working relationships are truly independent.

Keywords: Mandatory audit partner rotation; Audit quality; Previous working relationship (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:accoun:v:52:y:2017:i:2:p:101-121

DOI: 10.1016/j.intacc.2017.04.003

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