Rotation of audit partners is one of the main policy initiatives that has been implemented in many jurisdictions around the world to deal with concerns about audit quality. The basis of any requirement limiting the tenure of audit partners is that there is a reduction in audit quality associated with long periods of tenure. Using data from Australia, where the audit partner can be identified and for a period where partner rotation was not mandatory, we examine the association between audit quality and long audit partner tenure. The three measures of audit quality examined are the auditor's propensity to issue a going-concern audit opinion for distressed companies, the direction and amount of abnormal working capital accruals, and just beating (missing) earnings benchmarks. For long tenure observations we find a lower propensity to issue a going-concern opinion and some evidence of just beating (missing) earnings benchmarks, consistent with deterioration in audit quality associated with long audit partner tenure. There is no evidence of an association of long audit tenure with abnormal working capital accruals.

Abstract ABSTRACT: This paper examines the comparative effect of information choice and information processing on the judgment performance of auditors over two different levels of environmental predictability. The task was the prediction of corporate failure. The study found that information choice, as evidenced through suboptimal selection of ratios, was a limiting factor in performance. However, although subjects were able to utilize all the information from the ratios they selected, they were unable to improve performance when supplied with the superior combination of ratios determined by the environmental model. Thus, information processing also became a limiting factor in performance when subjects were unable to choose their own ratios.

Globally, companies increasingly publish separate general purpose, non-financial (sustainability) reports. Some of these are independently assured and assurers may or may not be from the auditing profession. We seek to understand this emerging voluntary assurance market. Using a sample of 2,113 companies (from 31 countries) that produced sustainability reports between 2002-2004, we use sequential logit analysis to identify the factors associated with the decision to voluntarily purchase assurance and the choice of assurance provider. We hypothesize that a company's need to enhance credibility through assurance and choice of assurance provider will be a function of company-, industry-, and country-related factors. Our results support the argument that companies seeking to enhance the credibility of their reports and build their corporate reputation are more likely to have their sustainability reports assured, although it does not matter whether the assurance provider comes from the auditing profession. We also find that companies operating in stakeholder-orientated countries are more likely to choose the auditing profession as an assurer.