The Effect of Previous Working Relationship between Rotating Partners on Mandatory Audit Partner Rotation



This study adds to the literature on mandatory rotation of audit partners in Chinese companies by examining the effect of the pre-rotation relationships between incoming and outgoing partners.  We consider the rotating partners to have prior working relationship if they were cosigners of audit reports before the rotation. We find two different outcomes of having prior working relationship: (a) increasing the likelihood that outgoing partners rotate back after the cooling off period, and (b) lower audit quality improvement after rotation. These findings bring  into  question the extent to which rotating partners with prior working relationships are truly independent.

File download:20190326053210194.pdf Downloads:610


RMBS made the Top-50 list of MBA,
EMBA and EE programs——The Financial Times

Renmin University of China

@Business School, Renmin University of China 京ICP备05066828号-1