An Audit Committee Member's Role in Audit Adjustment Disputes: Developing Long-Term Auditor Relationships' Effect on Audit Quality

• In Event: Continental Breakfast & Research and Education Forum
  In Paper Session: Table 16: Audit Firm Environment

Abstract

Audit committee members play a pivotal role in the audit process, specifically, when negotiating disputes between management and the external auditor concerning audit adjustments. Prior literature suggests an audit committee’s propensity to support the external auditor when dealing with the issues described above (Knapp 1987; DeZoort and Salterio 2001; DeZoort et al. 2003b; DeZoort et al. 2003a). However, these studies do not address how behavioral factors such as a relationship between the external auditors and audit committee members can affect a member’s stance. The purpose of this study is to investigate the effects that the relationship between audit committee members and external auditors and the mediating effect of auditor tenure have on a member’s recommendation for proposed audit adjustments. Results indicate that external auditor/audit committee member relationships and auditor tenure significantly influence an audit committee member’s decision making when faced with an auditor/management dispute. Also, auditor tenure does not negatively affect audit quality, however, no tenure (new) does negatively impact audit quality when the relationship is negative.

Author

• Emily R. Seay, Ohio University