Title
Auditor tenure and stock price idiosyncratic volatility : the moderating role of industry specialization
Document Type
Journal article
Source Publication
Auditing: A Journal of Practice and Theory
Publication Date
5-1-2016
Volume
35
Issue
2
First Page
147
Last Page
166
Publisher
American Accounting Association
Keywords
Auditor industry specialization, Auditor tenure, Stock price idiosyncratic volatility
Abstract
In this study, we examine how investors perceive the quality of financial reports audited by auditors with long tenure. We argue that auditor tenure is an important characteristic that influences the effectiveness of audits and thus affects the amount of firm-specific information that is included in stock prices by investors. Based on a sample of U.S. firms from 2003 to 2012, we show that longer tenure is associated with higher stock price idiosyncratic volatility. Further analyses reveal that this effect is only present for industry-specialist auditors, suggesting that the effect of tenure on idiosyncratic volatility is contingent on industry expertise. Our results have a number of implications for the financial markets and the accounting and auditing professions.
DOI
10.2308/ajpt-51256
Print ISSN
02780380
E-ISSN
15587991
Publisher Statement
Copyright © 2016 American Accounting Association. All rights reserved.
Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Su, L. N., Zhao, X. R., & Zhou, G. S. (2016). Auditor tenure and stock price idiosyncratic volatility: The moderating role of industry specialization. Auditing: A Journal of Practice and Theory, 35(2), 147-166. doi: 10.2308/ajpt-51256
