Effect of an Audit Partner’ Industry Auditing Tenure on Audit Quality Under the Mandatory Audit Partner Rotation System in Taiwan

Abstract

Abstract This study explores the effect of audit partner specialist tenure on audit quality and the complementary effect of audit partner industry tenure and audit tenure. This study first examines audit partners’ effect on audit quality in the early period of their tenure, and we expect to see inferior audit quality during this period. Next, we investigate the moderating effect of audit partner specialist tenure on audit quality; that is, we inspect whether audit partner specialist tenure can compensate for audit partners’ insufficient professional knowledge in the early period of their tenure. This study discovers that since the second modification of the Taiwanese audit partner rotation system in 2009, audit partners’ first audit still generates negative effects on audit quality; however, after audit partners accumulate experience in the industry, they can effectively ameliorate the negative effect generated during their first audit. JEL classification numbers: M42. Keywords: Audit partner specialist tenure, Complementary effect, Audit partner tenure, Audit quality.