Auditor Tenure and Quality of Financial Reporting

  title={Auditor Tenure and Quality of Financial Reporting},
  author={Ling Chu and Jie Dai and Ping Zhang},
Prior studies in general suggest a positive association between auditor tenure (the length of an auditor–firm relationship) and reporting quality (the informational content of reported earnings). In this study, we present evidence that the association is reversed when clients represent increased litigation risks to their auditors. Featuring downward biases in reported earnings as a measure of reporting quality that stem from auditors’ minimization of costs from potential audit errors, we argue… CONTINUE READING