Document Type

Article

Publication Date

2023

DOI

10.1002/jcaf.22679

Publication Title

The Journal of Corporate Accounting & Finance

Volume

35

Issue

2

Pages

157-170

Abstract

This paper investigates the influence of a firm's accounting reporting complexity (ARC) on financial statement audit quality. We predict and find that there is a non‐linear relationship between a firm's ARC and audit quality. Specifically, a more complex accounting environment—measured by ARC—leads to higher quality audits, but this effect diminishes when ARC continues to increase. Further analyses reveal that the effect is more salient among client firms that do not purchase non‐audit services (NAS). We also examine whether ARC affects audit quality in the circumstance of mandatory audit partner rotation. Empirical results show a moderating effect of ARC on the negative influence of audit partner rotation on audit quality. Our study extends the literature by illustrating how a firm's ARC influences audit quality in a special manner.

Rights

© 2023 The Authors.

This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs 4.0 International (CC BY-NC-ND 4.0) License, which permits use and distribution in any medium, provided the original work is properly cited, the use is non-commercial and no modifications or adaptations are made.

Data Availability

Article states: "The data that support the findings of this study are from publicly available sources including/Compustate, Audit Analytics, AuditorSearch on the PCAOB website, and XBRL research."

Original Publication Citation

Chen, C., Liu, Z., Tang, W., & Tuo, L. (2023). Accounting reporting complexity, audit engagement partner mandatory rotation, and audit quality. Journal of Corporate Accounting & Finance, 35(2),157-170. https://doi.org/10.1002/jcaf.22679

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