The joint effects of partner rotation and allocation of audit hours on audit quality

Minjung Kang, Sangil Kim and Ho-Young Lee

Managerial Auditing Journal, 2023, vol. 38, issue 6, 947-971

Abstract: Purpose - This study aims to examine the effects of allocation of audit hours to year-round audits and audit partners on audit quality when a new partner is appointed. Design/methodology/approach - Using proprietary data of partners’ names and audit hours in the year-round context, the authors build a model testing input factors related to audit production and new partner assignment in 1,209 Korean listed firms during the period of 2015–2018. Findings - The results show that in the partner rotation, the more audit hours spent, the more audit hours are allocated to the year-round audit, or more nonpartners’ audit hours are allocated to the year-round audit, the higher the audit quality. Subsample analyses show that these findings are concentrated in firms with longer audit tenure or low audit risk. Research limitations/implications - The findings may provide regulatory authorities with practical guidelines concerning partner rotation and how to allocate audit hours to different audit stages and ranks (partner vs staff). Originality/value - To the best of the authors’ knowledge, this study provides the first evidence of the joint effects of partner rotation and audit hour allocation on audit quality.

Keywords: Audit partner; Partner rotation; Audit quality; Audit hour allocation; Year-round stage; Year-end stage (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:majpps:maj-04-2023-3892

DOI: 10.1108/MAJ-04-2023-3892

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