Does shared tenure between audit committee chair and engagement partner affect audit outcomes?: Evidence from the UK

Salem Alhababsah; Alaa Alhaj Ismail

doi:10.1016/j.bar.2021.101067

Does shared tenure between audit committee chair and engagement partner affect audit outcomes? Evidence from the UK

Salem Alhababsah, Alaa Alhaj Ismail

Research output: Contribution to journal › Article › peer-review

6 Citations (Scopus)

111 Downloads (Pure)

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.

Original language	English
Article number	101067
Number of pages	28
Journal	The British Accounting Review
Volume	55
Issue number	2
Early online date	8 Nov 2021
DOIs	https://doi.org/10.1016/j.bar.2021.101067
Publication status	Published - Mar 2023

Bibliographical note

© 2023, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/

Copyright © and Moral Rights are retained by the author(s) and/ or other copyright owners. A copy can be downloaded for personal non-commercial research or study, without prior permission or charge. This item cannot be reproduced or quoted extensively from without first obtaining permission in writing from the copyright holder(s). The content must not be changed in any way or sold commercially in any format or medium without the formal permission of the copyright holders.

This document is the author’s post-print version, incorporating any revisions agreed during the peer-review process. Some differences between the published version and this version may remain and you are advised to consult the published version if you wish to cite from it.

Keywords

Audit committee chair
Audit fees
Audit quality
Engagement partner
Shared tenure

ASJC Scopus subject areas

Accounting

Access to Document

10.1016/j.bar.2021.101067

Post-PrintAccepted author manuscript, 1.19 MBLicence: CC BY-NC-ND

Cite this

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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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