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Do audit tenure and firm size contribute to audit quality? Empirical evidence from Jordan

Ali Abedalqader Al‐Thuneibat (Department of Accounting, Faculty of Business, University of Jordan, Amman, Jordan)
Ream Tawfiq Ibrahim Al Issa (Secured Services Systems, Amman, Jordan)
Rana Ahmad Ata Baker (Telecommunication Regulatory Commission, Amman, Jordan)

Managerial Auditing Journal

ISSN: 0268-6902

Article publication date: 19 April 2011

9897

Abstract

Purpose

The purpose of this paper is to analyze the effect of the length of the audit firm‐client relationship and the size of the audit firm on audit quality in Jordan.

Design/methodology/approach

To test their hypotheses, the authors use the quadratic form approach, similar to Chi and Huang, with some modifications. The population of this study encompasses all firms in which stock is publicly traded on the Amman Stock Exchange throughout the years (2002‐2006).

Findings

Statistical analysis of data shows that, audit firm tenure affects the audit quality adversely (negatively). Audit quality deteriorates, when audit firm tenure is extended as a result of the growth in the magnitude of discretionary accruals. Meanwhile, data analysis did not reveal that the audit firm size has any significant impact on the correlation between audit firm tenure and audit quality.

Practical implications

If auditor independence and audit quality are to be enhanced, the audit firm should be rotated in order to open the door for new auditors to investigate the client with greater scrutiny and due care. Moreover, the activities of big audit firms should be monitored in order to distinguish their role from small firms.

Originality/value

The paper provides evidence from a developing country about audit quality. It is expected to support and sustain improvement of audit quality, and therefore, financial reporting quality. The evidence provided by this paper adds to the literature internationally and this is important because auditing is a socially constructed phenomenon.

Keywords

Citation

Abedalqader Al‐Thuneibat, A., Tawfiq Ibrahim Al Issa, R. and Ata Baker, R.A. (2011), "Do audit tenure and firm size contribute to audit quality? Empirical evidence from Jordan", Managerial Auditing Journal, Vol. 26 No. 4, pp. 317-334. https://doi.org/10.1108/02686901111124648

Publisher

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Emerald Group Publishing Limited

Copyright © 2011, Emerald Group Publishing Limited

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