Audit Tenure, Rotation and Accounting Conservatism: Empirical Evidences from Nigeria

  • Ayorinde B
  • Babajide O
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Abstract

The possibility exists that auditors might get too familiar with their clients and in consequence loses professional scepticism and objectivity when the relationship goes on for too long. Stakeholders are therefore interested in if long-term relationship between companies and their auditors gives rise to closeness that impairs auditors’ independence and reduces quality of audit work. With these in view, an attempt was made by the research to examine the link between audit tenure, rotation, and accounting conservatism using empirical data from Nigeria. Secondary data were randomly gathered by drawing 100 observations from the published financial statements of sample companies operating in the financial and non-financial sectors. Quantitative methods such as descriptive statistics, correlation, and multiple- regression analysis were used for data analyses. Findings were that; the tenure of auditor has a significant positive influence on firms accounting conservatism; the rotation of audit firms also significantly influences accounting conservatism. The study recommends the mandatory rotation of audit firms’ lead engagement partner and the review partner on an engagement for publicly listed companies, and the strict prohibition of providing non-audit services by auditors to their clients to enhance auditors’ independence and the quality of audit services

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APA

Ayorinde, B., & Babajide, O. (2015). Audit Tenure, Rotation and Accounting Conservatism: Empirical Evidences from Nigeria. Journal of Business & Financial Affairs, 04(03). https://doi.org/10.4172/2167-0234.1000150

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